international maritime organization secretary-general… financial statements for the...

INTERNATIONAL MARITIME ORGANIZATION

SECRETARY-GENERAL'S STATEMENT AND FINANCIAL STATEMENTS

FINANCIAL PERIOD ENDED 31 DECEMBER 2014

TABLE OF CONTENTS

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Secretary-General's Statement 3

Statement I – Statement of Financial Position as at 31 December 2014

22

Statement II – Statement of Financial Performance for the year ended 31 December 2014

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Statement III – Statement of Changes in Net Assets for the year ended 31 December 2014

25

Statement IV – Statement of Cash Flow for the year ended 31 December 2014

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Statement V – Statement of Comparison of Budget and Actual Amounts for the year ended 31 December 2014

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Notes to the Financial Statements 29

ANNEX 1 (unaudited) 76

ANNEX 2 – Opinion of the External Auditor on the Organization's Financial Statements for the financial period ended 31 December 2014

77

SECRETARY-GENERAL'S STATEMENT

INTRODUCTION

1 In accordance with financial regulation 12.10, I have the honour to submit to the Council, for its examination and onward transmission to the Assembly, the financial statements of the International Maritime Organization (IMO) for the year ended 31 December 2014. 2 The Report of the External Auditor on the audit of the 2014 financial statements, together with his opinion thereon, are also submitted to the Council as prescribed under financial regulation 12.10. 3 The financial statements have been prepared in accordance with the International Public Sector Accounting Standards (IPSAS), as prescribed by financial regulation 11.1, adopted by the Assembly through resolution A.1017(26) effective 1 January 2010, and in line with the United Nations policy that IPSAS be used as the accounting standards by United Nations system organizations. 4 In 1948, an international conference in Geneva adopted a convention formally establishing the Intergovernmental Maritime Consultative Organization (IMCO). The Convention entered into force in 1958 and the Organization came into being in 1959. In 1982, the original name was changed to the International Maritime Organization. The Headquarters of the Organization are in London and its complement is approximately 290 staff members, including project staff and Associate Professional Officers. IMO's principal place of business, as well as the names and addresses of its General Counsel, actuary, principal bankers and external auditor are indicated in annex 1 to these financial statements. 5 Within the meaning of IPSAS, IMO also controls the World Maritime University (WMU) and the IMO International Maritime Law Institute (IMLI), the financial records of which are presented within these financial statements. IMO is not a controlled entity within the meaning of IPSAS, its ultimate decision-making body being its Assembly of 171 Member States, with an elected Council of 40 Member States performing, in accordance with Article 26 of its constitutive Convention, all functions of the Assembly, with the exception of some technical matters, between sessions of the Assembly. 6 The purposes of the Organization, as summarized in Article 1(a) of its Convention, are "to provide machinery for cooperation among Governments in the field of governmental regulation and practices relating to technical matters of all kinds affecting shipping engaged in international trade; to encourage and facilitate the general adoption of the highest practicable standards in matters concerning maritime safety, efficiency of navigation and prevention and control of marine pollution from ships; and to deal with administrative and legal matters related to the purposes set out in this Article". 7 The mission statement of IMO is as follows: "The mission of the International Maritime Organization (IMO), as a United Nations specialized agency, is to promote safe, secure, environmentally sound, efficient and sustainable shipping through cooperation. This will be accomplished by adopting the highest practicable standards of maritime safety and security, efficiency of navigation and prevention and control of pollution from ships, as well as through consideration of the related legal matters and effective implementation of IMO's instruments, with a view to their universal and uniform application."

8 IMO, through the development and approval of its Strategic Plan, the most recent of which was approved by the Assembly in November 2013 to cover the period 2014-2019, has defined 13 strategic directions (SDs), which are key to delivering its mission. These are: Enhancing the status and effectiveness of IMO SD 1 IMO is the primary international forum for technical matters of all kinds affecting

international shipping and legal matters related thereto. An inclusive and comprehensive approach to such matters will be a hallmark of IMO. IMO will actively promote its role as the primary international forum on matters within its competence and ensure and strengthen the linkage between safe, secure, efficient and environmentally friendly maritime transportation, the development of global trade and the world economy and the achievement of the Millennium Development Goals (MDGs). In order to maintain that primacy, it will:

.1 further develop its role in maritime affairs vis-à-vis other intergovernmental

and international organizations, so as to be able to deal effectively and comprehensively with complex cross-agency issues;

.2 actively engage the various stakeholders to ensure a more inclusive

approach to decision making; and .3 actively seek to reap synergies and avoid duplicating efforts made by other

United Nations agencies in shipping matters. The related performance indicators are: 1, 2, 3, 16, 17 and 19 The related key performance indicators are: G, H, I, J and R

SD 2 IMO will foster global compliance with its instruments governing international shipping

and will promote their uniform implementation by Member States.

The related performance indicators are: 1, 2, 3 and 14 The related key performance indicators are: G, H, I, J, K, L, M and N

SD 3 With a view to enhancing its contribution to sustainable development, IMO will

strengthen its maritime capacity-building programmes and will focus on:

.1 developing capacity-building partnerships with governments, organizations and industry;

.2 ensuring the long-term sustainability of the ITCP; .3 contributing to the achievement of the MDGs and relevant outcomes of

UNCSD 2012, such as the future Sustainable Development Goals, including through the development of major projects targeting emerging issues;

.4 meeting the needs of its developing Member States; and .5 further improving the delivery, utilization, efficiency and effectiveness of its

technical assistance and cooperation programmes. The related performance indicators are: 1, 14 and 15 The related key performance indicators are: G, I, K, L, M, N and O

SD 4 Internally, IMO should be able to respond effectively and efficiently to emerging trends,

developments and challenges. It will strive for excellence in governance and management. Besides the Strategic Plan, it will maintain a risk management framework. The Council will provide visionary leadership, committees will be optimally structured and will be supported by an effective and efficient Secretariat. Within approved biennial appropriations and in accordance with a detailed Business Plan, the Secretariat will be endowed with sufficient resources and expertise to realize the Organization's work plans, and the Organization will make effective use of information and communication technology in management and administration.

The related performance indicator is: 16 The related key performance indicators are: P and Q

Developing and maintaining a comprehensive framework for safe, secure, efficient and environmentally sound shipping SD 5 IMO's highest priority will be the safety of human life at sea. In particular, greater

emphasis will be accorded to: .1 ensuring that all systems related to enhancing the safety of human life at sea

are adequate, including those concerned with large concentrations of people; .2 enhancing technical, operational and safety management standards; .3 eliminating shipping that fails to meet and maintain these standards on a

continuous basis; and .4 increasing the emphasis on the role of the human element in safe shipping. The related performance indicators are: 3, 4, 5, 11, 12 and 13 The related key performance indicators are: A, B, G, H, I and J

SD 6 IMO will seek to enhance the security of the maritime transport network, including vital

shipping lanes, and to reduce piracy and armed robbery against ships, as well as the frequency of stowaway incidents, by:

.1 promoting a comprehensive and cooperative approach, both among Member

States within the Organization and between IMO and other intergovernmental and non-governmental organizations;

.2 raising awareness of IMO security measures and promoting their effective

implementation; .3 raising awareness of IMO measures against piracy and armed robbery

against ships and promoting their effective implementation; .4 increasing the emphasis on the role of the human element and safeguarding

the human rights of seafarers in secure shipping; and .5 increasing the emphasis on safety and security of seafarers. The related performance indicators are: 6, 7, 11, 12 and 15 The related key performance indicators are: E, F, I, J, N and O

SD 7 IMO will focus on reducing and eliminating adverse impacts from shipping on the

environment by: .1 identifying and addressing possible adverse impacts;

.2 developing and facilitating the implementation of effective measures for mitigating and responding to the impact on the environment caused by shipping incidents and operational pollution from ships;

.3 contributing to international efforts to reduce atmospheric pollution and address climate change; and

.4 increasing the emphasis on the role of the human element in environmentally sound shipping.

The related performance indicators are: 8, 9, 10, 11 and 12 The related key performance indicators are: C, D, I, J, N and O

SD 8 IMO will seek to ensure that measures to promote safe, secure and environmentally sound shipping do not unduly affect the efficiency of shipping. It will also constantly review such measures to ensure their adequacy, effectiveness and relevance, using the best available tools, thereby securing better regulation without unnecessary or disproportionate administrative requirements. The Organization will periodically review administrative provisions of existing conventions and mandatory instruments with the aim of finding improved, more efficient solutions for those administrative requirements that are necessary. Those provisions of existing conventions and mandatory instruments that have become unnecessary and/or burdensome will also be reformed and/or eliminated without compromising safety, security and the protection of the environment.

The related performance indicators are: 1, 2, 3 and 20 The related key performance indicators are: G and H

SD 9 IMO will pay special attention to the shipping needs of small island developing States (SIDS) and the least developed countries (LDCs).

The related performance indicator is: 14 The related key performance indicators are: K, L, M, N and O

SD 10 IMO will apply goal-based standards for maritime safety and environmental protection.

The related performance indicator is: 18 The related key performance indicators are: A and B

Enhancing the profile of shipping, quality culture and environmental conscience

SD 11 IMO, in partnership with other stakeholders, will seek to raise the profile of the safety, security and environmental records of shipping in the eyes of civil society by:

.1 actively publicizing the vital importance of shipping as a safe, secure and environmentally sound mode of transport for goods and people, and underlining the role of the Organization in that regard; and

.2 consequently further enhancing its public outreach programmes. The related performance indicators are: 4(b), 5(b), 6, 7, 8, 10, 11, 14 and 17(b) The related key performance indicators are: R, S, T and U

SD 12 IMO will take the lead in enhancing the quality culture of shipping by:

.1 encouraging the utilization of the best available techniques not entailing excessive costs, in all aspects of shipping;

.2 encouraging proper management of ships; .3 promoting and enhancing the availability of, and access to, information –

including casualty information – relating to ship safety, security and the environment (i.e. transparency);

.4 ensuring that all stakeholders understand and accept their responsibilities regarding safe, secure and environmentally sound shipping by developing a "chain of responsibility concept" among them; and

.5 identifying, correlating and evaluating the factors, including human interaction on board ships, that influence safety, security and environmental culture, and developing practical and effective mechanisms to address them.

The related performance indicators are: 3, 11 and 12 The related key performance indicators are: G, H, I and J

SD 13 IMO will seek to enhance environmental conscience within the shipping community.

The related performance indicators are: 10, 11 and 12 The related key performance indicators are: I, J, N and O

SERVICE DELIVERY – HIGHLIGHTS OF 2014 9 2014 saw IMO actively pursuing its targets and objectives in a wide range of subject areas. Some of the highlights of what was a busy, varied and successful year for the Organization are summarized below. Maritime safety 10 IMO adopted the International Code for Ships Operating in Polar Waters (Polar Code), and related amendments to the International Convention for the Safety of Life at Sea (SOLAS) to make it mandatory1, marking an historic milestone in the Organization's work to protect ships and people aboard them, both seafarers and passengers, in the harsh environment of the waters surrounding the two poles. Further, the MSC approved the e-navigation Strategy Implementation Plan (SIP), providing a framework of tasks that would need to be implemented or conducted in the future to give effect to five prioritized e-navigation solutions. Also, the Secretary-General pledged further action to address domestic ferry safety and, accordingly, a mechanism was established under the newly activated and related technical cooperation programme to develop relevant guidelines and recommendations, while a major conference on the subject will be held in April 2015 in the Philippines. Environmental protection 11 Measures to accelerate the entry into force and implementation of IMO's Ballast Water Management (BWM) Convention were adopted by the MEPC. Resolutions adopted by the MEPC addressed issues surrounding the type-approval of BWM systems and guidance for port State control inspections. They were heralded by the shipping industry as "significant progress" on what had been proving challenging topics to resolve. The MEPC approved the

1 The MEPC is expected to take similar action in 2015 under the MARPOL Convention.

http://www.imo.org/MediaCentre/PressBriefings/Pages/38-nmsc94polar.aspx#.VJqeBl4gB

Third IMO GHG Study 2014, giving updated estimates for greenhouse gas emissions from ships. The study estimates that international shipping emitted 796 million tonnes of carbon dioxide (CO2) in 2012, against 885 million tonnes in 2007. This represented 2.2% of the global emissions of CO2 in 2012, against 2.8% in 2007. However, the "business as usual" scenarios continue to indicate that those emissions are likely to grow by between 50% and 250% in the period to 2050, depending on future economic and energy developments. Security and anti-piracy measures 12 IMO joined with other UN agencies in calling for concerted action from the international community to address the deeply concerning problem of the loss of life, injury, trauma and serious human rights violations affecting migrants, asylum-seekers and refugees traveling by sea. IMO implemented a number of projects to build capacity in Gulf of Guinea countries to tackle piracy in the region as well as other illicit maritime activity, under the Code of Conduct concerning the prevention of piracy, armed robbery against ships and illicit maritime activity in West and Central Africa, which was signed in 2013. Legal matters 13 The Athens Convention relating to the Carriage of Passengers and their Luggage by Sea, 2002, which substantially raises the limits of liability for the death of, or personal injury to, a passenger on a ship, entered into force on 23 April 2014. The Nairobi International Convention on the Removal of Wrecks received sufficient ratifications to reach the entry into force criteria. It will enter into force on 14 April 2015. Projects and technical cooperation 14 Among other projects and workshops, representatives from 11 West and Central Africa countries attended the first IMO regional workshop on "MARPOL Annex VI – Ship energy efficiency and technology transfer" in Accra, Ghana, from 2 to 4 July. The workshop was hosted by the Ghana Maritime Authority and aimed at building capacity with regards to knowledge about energy-efficiency measures, while also assessing the regional needs and barriers related to technology transfer. The European Union signed a €1.2 million grant contract with IMO and the African, Caribbean and Pacific Group of States (ACP) to support training and capacity-building activities aimed at enhancing flag State implementation and port State control in West and Central Africa, with a view to upgrading the region's maritime administrations and preparing its States for the mandatory IMO audit scheme. Implementing IMO measures

15 The Maritime Safety Committee (MSC) and the Marine Environment Protection Committee (MEPC) completed the legal framework for the implementation of the mandatory IMO audit scheme, to make the auditing of Member States mandatory once amendments to relevant treaties enter into force in 2016. The scheme will be an important tool for assessing Member States' performance in meeting their obligations and responsibilities as flag, port and coastal States under the relevant IMO treaties. MONITORING OF OUTPUTS AND OUTCOMES 16 During 2014 the Council initiated a fundamental review of IMO's strategic framework including through the assistance of an external consultant. The Council, at its 113th session noted the external consultant's recommendations and decided that the Strategic Plan should be reviewed to ensure simplicity and to make sure that it would continue to serve the Organization going forward; that the Strategic Plan should be fixed for a six-year period; and that in order to give proper consideration to the recommendations in the report, a Working

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Group would be established in 2015 with the participation of all Member States. In this context, it was also decided to suspend future analysis and presentation of PIs and KPIs in the current Strategic Plan; and not to apply the methodologies of medium level complexity proposed in document CWGSP 10/2(b) as a new methodology would have to be developed when new performance measures were agreed upon. 17 In delivering its Strategic Plan, the Assembly also considers a biennial High-level Action Plan (HLAP) which specifies the planned outputs for a two-year period aligned with the biennial budgeting cycle. Information on the status of delivery of planned outputs is provided by the Secretariat to the Council, the committees, the sub-committees and the CWGSP throughout the biennium. 18 Table 1 below shows the status of delivery of the 156 outputs that were active under the HLAP for the 2014-2015 biennium. It should be noted that due to the removal of the Secretariat's outputs from the HLAP and an exercise to minimize duplication of planned outputs, the number of outputs in the 2014-2015 HLAP was significantly reduced, without this meaning a reduction in actual work. 19 The HLAP adopted as A.1061(28) consisted of 150 planned outputs. Two planned outputs were deleted or transferred to the post-biennial agenda for work to be carried out in future years, with a further 8 unplanned outputs being approved by the relevant IMO organs during 2014.

Table 1: Status of outputs under the HLAP 2014-2015, as at 31 December 2014

20 Of the 156 biennial outputs, 32.1% were completed by the end of 2014. With the adoption of the HLAP by the Assembly, approximately 50% of planned outputs had been forecasted to be completed by the end of 2014 (target completion year 2014 or annual). The largest category, representing some 44%, are still ongoing/in progress and is composed, not unexpectedly, of recurrent annual work by the IMO organs concerned. 19% of outputs were postponed to 2015 and beyond, as work could not be completed as expected. Some of these postponed outputs might be attributed to the new sub-committee structure that has meant a very significant work load on some sub-committees. 21 Table 2 below presents the same status data as shown in figure 1, but distributed across each of the Strategic Plan's 13 strategic directions. Table 2: Status of outputs as at 31 December 2014 by strategic direction

22 The foregoing analysis of service delivery complies with the guidance provided by IPSAS and resolution A.1062(28)2 for reporting on organizational performance at the level of the Organization's strategic directions, high-level actions and biennial outputs. However, this reporting model reflects, in the main, the outcome of the work of IMO's regulatory bodies, which results from the technical and political consultation and debates between Member Governments and industry and civil society entities in consultative status. Monitoring the Secretariat's Business Plan 23 The Council agreed in 2013 that, in order to better monitor performance, the HLAP should contain only the planned outputs that are directly related to the expected deliverables of the Assembly, Council, committees, sub-committees and conferences and the Business Plan of the Secretariat should contain all of its supporting activities, as well as the "follow-up activities" flowing from decisions taken by the Organization. The new system has been introduced in the 2014-2015 biennium. 24 The biennial Business Plan, which specifies the deliverables/actions to achieve the divisional objectives for a two-year period, is aligned with the biennial budgeting cycle. Information on the status of delivery of the deliverables/actions is provided by the Secretariat to the Council throughout the biennium in conjunction with status of the HLAP. 25 The Business Plan includes service delivery by the Secretariat, mainly in connection with the support of the meeting schedule of the Organization (i.e. technical meeting support, translation, documentation and conference services), but also in other areas (i.e. technical cooperation, legal services, financial, human resources, information and communication technology (ICT) and procurement services, collaboration with the UN System, protocol, liaison and representation services, etc.). 26 Table 3 below shows the status of the 235 deliverables/actions to achieve the divisional objectives that were active under the Secretariat's Business Plan for the 2014-2015 biennium.

Table 3: Status of deliverables/actions to achieve the divisional objectives of the Secretariat's Business Plan 2014-2015, as at 31 December 2014

2 Guidelines on the application of the Strategic Plan and High-level Action Plan of the Organization

27 Of the 235 deliverables/actions to achieve the divisional objectives, 83.8% were completed by the end of the year. As the Secretariat mostly engages in annual or continuous processes that are carried out throughout the biennium, the majority of actions to achieve the divisional objectives are completed for the current year and will be repeated in the second year of the biennium. 13.2% of the deliverables/actions are still ongoing and 3.0% of deliverables/actions are planned to be initiated in 2015. The ongoing deliverables/actions are comprised of activities that were planned to take place over a two-year period. 28 Table 4 below shows the assessment of the 235 deliverables/actions to achieve the divisional objectives that are active under the Secretariat's Business Plan for the 2014-2015 biennium.

Table 4: Assessment of the deliverables/actions to achieve the divisional objectives of the Secretariat's Business Plan 2014-2015, as at 31 December 2014

29 The delivery of 62.9% of all deliverables/actions was assessed as excellent, with reference to the related success indicator and pre-defined assessment criteria. The delivery of 35.3% of the deliverables/actions was assessed as good and only 1.8% as poor. The assessment of 11 deliverables/actions that are planned for 2015 or still ongoing is not included and will be assessed at the end of the biennium. Financial resources

30 IMO's activities are mainly funded by assessed contributions on its Member States and Associate Members. Voluntary contributions from Member States, governmental agencies, intergovernmental bodies and other public, private and non-governmental sources may support financially certain activities of the Organization, the finances of which may receive further support through commercial activities (including the sale of publications and catering and conference services); and through miscellaneous revenue (including interest on financial assets). Indirect support cost income, earned through third party agreements with donors, is also used to fund activities provided for in the regular budget.

Governance and management

31 The Organization's governance, through the Assembly and the Council, is defined in the IMO Convention. The key management personnel of IMO consists of the Secretary-General and seven Divisional/Departmental Directors. The key management personnel of WMU and IMLI consists of the President and Director, respectively. Related party disclosures in line with IPSAS requirements are accordingly included in the notes to the financial statements. The Council is responsible for providing intergovernmental support and specific policy direction to, and supervision of, the activities of IMO. In view of its State-membership composition, the Council is not considered a related party as defined by IPSAS.

IPSAS-compliant Financial Statements

32 Since 2010, the Organization has prepared annual financial statements compliant with IPSAS.

33 Several key financial definitions under IPSAS are presented below to enhance the usability and understanding of these financial statements:

.1 Assets are resources controlled by IMO as a result of past events in which future economic benefits or service potentials are expected to flow to IMO.

.2 Liabilities are present obligations arising from past events, the settlement of which is expected to result in an outflow of resources embodying economic benefits or service potential.

.3 Net assets are the residual interest in the assets of IMO after deducting all its liabilities.

.4 Revenue is the gross inflow of economic benefits or service potential during the reporting period when those inflows result in an increase in net assets.

.5 Expenses are decreases in economic benefits or service potential during the reporting period in the form of outflows or consumption of assets or incurrence of liabilities that result in decreases in net assets.

.6 Non-exchange transactions are those transactions for which IMO either receives from or gives value to another entity without directly giving or receiving approximately equal value in exchange.

.7 Monetary items are units of currency held and assets and liabilities to be received or paid in fixed or determinable amounts.

.8 Surplus for the period is the excess of all items of revenue over expense recognized in a period.

34 Under the accrual basis of accounting, revenues and expenses are recognized in the financial statements in the period to which they relate. IMO recognizes revenues upon written confirmation of contributions and expenses are recognized at the point at which an unavoidable liability is created, typically when goods or services are delivered. The excess of revenues over expenses results in a surplus which is carried forward to the accumulated fund balances. These fund balances represent the unexpended portion of contributions to be utilized in future operational requirements of the Organization.

35 Under IPSAS, the matching principle of revenue and expense does not apply for non-exchange transactions. The focus of IPSAS is the financial position which is evidenced by the recognition of assets, when there is sufficient control, and of liabilities, when the criteria to recognize liabilities exist.

36 Outstanding commitments raised against accumulated fund balances do not meet the recognition criteria of expenses under the principle outlined above. These commitments, from a budgetary point of view, are addressed through the provisions of financial regulations 4.3 and 4.4 which allow the transfer of budgets for committed items into the following financial periods.

37 IMO participates in the United Nations Joint Staff Pension Fund (UNJSPF)3, which was established by the United Nations General Assembly to provide post-employment retirement, death, disability and related benefits to employees of the system. The pension fund is a funded multi-employer defined benefit plan. 38 The financial obligation of IMO to the UNJSPF comprises its mandated contribution at the rate established by the United Nations General Assembly, together with a share of any actuarial deficiency payments. The actuarial method adopted for the valuation of the UNJSPF is the Open Group Aggregate method carried out every two years. The most recent actuarial valuation completed was at 31 December 2013. The United Nations General Assembly has maintained over the years the general criteria that guide the investment of the assets of the UNJSPF.

39 The plan exposes participating organizations to actuarial risks associated with the current and former employees of other organizations, with the result that there is no consistent and reliable basis for allocating the obligation, plan assets, and costs to individual organizations participating in the plan. As neither IMO nor the UNJSPF are in a position to identify IMO's share of the underlying financial position and performance of the plan with sufficient reliability in line with IPSAS 25, IMO accounts for the plan as a defined contribution rather than as a defined benefit plan. 40 The attached financial statements and the accompanying notes are presented in Pounds Sterling (GBP) throughout, which allows for an overview of the Organization's financial position in a single currency. Reporting to the Technical Cooperation Committee and individual donors at a more detailed level continues to be made in the most appropriate currency.

FINANCIAL RISK MANAGEMENT

41 At its 100th session in June 2008, the Council approved the Organization's Risk Management Framework (RMF), consisting of a Risk Management Policy, Risk Management Definitions and a Risk Management Process. It requested the Secretariat to apply the RMF to the strategic directions and high-level actions falling under the Secretary-General's responsibility as well as to the Secretariat-related key objectives for 2009. A similar exercise has been conducted periodically since that time, the results being reported to the Council and its Risk Review, Management and Reporting Working Group (CWGRM). 42 In addition to the RMF, IMO has an established framework of internal controls, including internal oversight, designed to maximize the effective and efficient use of its resources and safeguard its assets. 43 IMO's activities expose it to a variety of financial risks, including the effects of fluctuations in currency exchange rates and interest rates; and defaults by investment

3 http://www.UNJSPF.org

counterparties and debtors in meeting their obligations. In managing financial risks, IMO's investment policy takes into account the unpredictability of financial markets and seeks to minimize, where feasible, any potential adverse effects on the Organization's financial performance, the focus being on capital retention rather than maximizing revenue. 44 Financial risk management is carried out by Financial Services in compliance with a defined investment policy, which has been developed on the basis of advice received from an independent treasury consultant. The Organization's treasury policy is approved by the Secretary-General and is reviewed and adjusted periodically, as necessary. Its implementation is the responsibility of a Treasury Committee which meets on a monthly basis to consider cash flow forecasts, treasury placements and the list of approved counterparties. Under the treasury policy, investment counterparties must meet minimum credit rating criteria, with the maximum amount and duration of deposits with any single counterparty being tiered on the basis of their rating. 45 IMO's treasury policy requires a monthly assessment of liquidity to ensure that amounts invested still allow the maintenance of sufficient cash to meet the Organization's commitments as and when they fall due. The majority of cash, cash equivalents and investments are available within one day's notice to support operational requirements, although penalties would apply on short-term investments should a deviation from agreed arrangements become necessary. 46 As at 31 December 2014, 72% of cash, cash equivalents and short-term investments were denominated in the GBP base currency. Non-GBP holdings primarily relate to contributions made by donors in currencies other than GBP where any return of funds would be in the currency of the donation. 47 Consistent with the objectives of its treasury policy, the Organization does not trade in equities, nor does it use derivatives or hedging for speculative purposes or for any other reason. The primary objective in placing funds on deposit is capital protection.

FINANCIAL AND BUDGET PERFORMANCE HIGHLIGHTS

48 The net assets position presented in Statement I shows a healthy financial situation for the Organization as a whole, with a closing net assets position of £15,777,018 (2013: £12,984,892), representing an increase of £2,792,126 (2013: decrease of £2,384,998) from the opening balance on 1 January 2014.

49 Looking, first, at the closing net assets position, it should be noted that, while the overall situation is strong, the reserves available to the Organization for future use are not without restrictions. Note 2.12 in the financial statements breaks down the overall reserve picture into the Organization's major funds, and it may be seen that, of the overall £15,777,018 (2013: £12,984,892) closing balance, £12,715,659 (2013: £12,719,229) relates to Multi-donor Trust Funds or the net position under bilateral agreements with individual donors. Such funds can only be applied in accordance with the Terms of Reference of the Fund concerned or the appropriate contractual agreement with the donor, respectively, and, as such, there are significant restrictions over their future use. The Working Capital Fund, the Headquarters Capital Fund, the Training and Development Fund and the Technical Cooperation Fund are all in a relatively strong financial position at present – noting that much of the surplus on the Trading Fund will, in due course, be transferred to the Technical Cooperation Fund in accordance with Assembly resolution A.1063(28). The positive position in the General Fund largely reflects the fact that the Organization's long-term After Service Health Insurance (ASHI) liability of £30,633,564 is shown under the Termination Benefit Fund in accordance with Assembly resolution A.991(25). These liabilities are presently unfunded, and are reflected in the Termination Benefit Fund deficit as at 31 December 2013 of £29,758,067.

50 The increase in cash and cash equivalents during 2014 primarily reflects the operating surplus for 2014, including an increase in the GBP value of the Organization's holdings of US dollars, of some £494,250, due to changes in foreign exchange rates between the two currencies during the year. The majority of the Organization's US dollar holdings are in respect of Multi-donor Trust Funds and other donor funds, which are budgeted, managed and reported in US dollars rather than GBP and, consequently, movements in the GBP value of such funds typically do not directly impact on the ability to deliver planned activities.

51 Contributions due from donors have fallen significantly from the situation at 31 December 2013, primarily as a number of donor agreements were concluded in December 2013 with the related amounts only being received in early 2014. The collection rate for Member States assessments remains strong, at 98.9% (2013: 99.5%).

52 Inventories, reflecting our stock of publications held for re-sale, are at a level comparable with prior years, with a slight increase from 2013 as a new edition of one of the Organization's major titles, the IMDG code, was published during November with a large initial print run.

53 We continue to seek to carefully balance our obligations to suppliers with the need to effectively manage the Organization's cash flow, and there has been little change in the overall balance of payables and accruals relating to exchange transactions. The most significant portion of the accruals balance relates to services provided by UNDP under the Service Clearing Account arrangement, but which have not yet been billed by UNDP through their monthly expenditure reporting. UNDP local offices worldwide provide IMO with a range and volume of services in the field which we would otherwise be unable to deliver in such an efficient manner, and are thereby key facilitators of the delivery of the Organization's Integrated Technical Cooperation Programme (ITCP). While the overall balance for payables and accruals is comparable to that for 2013, there has been a reduction in the Contribution Incentive Scheme liability as the process of distributing the earnings for the period 2006-2013 began during 2014.

54 The Organization's year-end employee benefit liabilities balance of £34,819,455 (2013: £33,428,097) mainly reflects obligations to current staff and retirees for ASHI, repatriation benefits and accrued annual leave, which have increased to £34,613,137 (2013: £33,092,991). These liabilities were last subject to actuarial valuation at 31 December 2013, an exercise the Organization conducts every two years. The increase is due to the fact that interest costs, which reflect the increase in the liability arising from being one year closer to settlement, and service costs reflecting the increase in the liability as a result of services provided by current staff in the year, are in aggregate £1,520,146 higher than the amounts paid by the Organization during 2014 for the provision of ASHI services to current retirees. This imbalance between the amounts being paid on a "pay as you go" basis for current retirees and the actual costs to the Organization for current staff and retirees, is likely to result in an increasing obligation in the future, and will continue to require careful monitoring and appropriate action. 55 Turning now to the operating performance for the year, which is shown in Statement II (Statement of Financial Performance), it should be noted that this financial performance of revenue and expenditure is presented on an IPSAS accrual basis and thus different in its measurement and accounting from the budgetary performance statement of receipt and payment reflected in Statement Va (IMO Only Statement of Comparison of Budget and Actual Amounts) which is prepared on a modified cash/accrual basis. The difference in amounts between the two statements is reconciled to the cash flow statement (Statement IV), as described in detail in Note 5 to the Financial Statements. For instance, the assessed contribution (i.e., invoiced amounts of £30,116,000) for the year is 100% accounted for as

revenue in Statement II, whereas only receipted amounts (£29,852,543) are shown as Actual in Statement Va. Likewise, while expenditure in Statement II includes the amount of £1,033,126 for depreciation and amortization on an accrual basis, that amount, as it is not the cash payment of the year, is not included in Statement Va. The financial performance of the year was a surplus of £2,792,126, an improvement of £3,323,623 compared with a deficit of £531,497 shown in 2013, due, firstly, to a decrease in expenditure (particularly, in supplies, consumables and other running costs) and, secondly, to currency exchange gains of £883,230. On the other hand, the budgetary performance under the modified cash basis shown in Statement Va points to a net receipt (surplus) of £3,493,116 over payments for the year largely because of decreases in payments, especially in capital investment and technical cooperation. 56 The Assembly, by resolution A.1063(28), approved for 2014 both the budget income of £43,523,600 and the appropriation of £44,579,000 under the IMO budgetary Funds, which are presented as original budget amounts in Statement Va. The final budget amount for income remained the same as the original income budget and actual receipts amounted to £43,079,545, representing 99% of the final income budget. More than two-thirds (69%) of actual receipts was assessment contributions (£29,852,543), received both for 2014 and for prior years. and represented 1% below the assessment income budget for 2014 of £30,116,000. The support costs income was £1,302,367, representing 92% of the budget, which was realized from two main sources: £634,986 from the Trading Fund (representing some 95% of the planned amount from that Fund of £670,000) and £667,381 from various donor and trust Funds, other UN agencies and the Technical Cooperation Fund (representing approximately 89% of the estimated £750,000 for the year). In addition to the assessed contributions and support costs income, revenue from other sources primarily reflected commercial activities, namely the sale of IMO publications and catering services, which have been conducted through the Trading Fund. The Trading Fund income decreased slightly to £11,722,831 from the outturn in 2013 of £11,875,566, but almost met (99%) the income target of £11,837,600 for 2014, thanks to continuing demands on the new IMDG Code and its supplement, which were marketed in the second half of 2014; the GMDSS Manual; IMSBC Code; Ships' Routeing; and ISM Code & Guidelines. Other miscellaneous income for 2014 amounted to £201,804, representing 35% over and above the original estimate of £150,000 for the year, mainly due to active management of the treasury deposits resulting in higher interest earnings.

57 The combined income (planned and received) of WMU and IMLI as at the end of December 2014 is separately presented under the heading of Education and research as shown in Statement Vb (consolidated statement). Actual receipts amount to £10,532,575, which indicates that the two educational entities nearly met (99%) the target set in the final budget of £10,622,108 for 2014, following continued demand for professional and other academic development courses. Overall actual income under the consolidated statement was £53,612,120 for the year, representing 99% of the final budget amount of £54,145,708 for the corresponding period.

58 In respect of expenditure amounts, the original budget for 2014 is £44,579,000 as shown in Statement Va, which includes only the amounts approved by the Assembly in resolution A.1063(28) and thus does not comprise current budgets for various donor/trust fund programmes. The final expenditure budget shown in Statement Va of £45,080,111 included the budgets brought forward from 2013 of £501,111 in total to meet the 2013 unliquidated obligations (ULOs) in accordance with the delivery principle under IPSAS 1. Actual expenditure amounts were measured against the final budget amounts and some budgetary savings were made in all IMO activities, as summarized hereunder. 59 Actual expenditure under regular budget Strategic Results in 2014 amounted to £28,791,046, representing an underspend of 9% (£2,923,064) of the corresponding final budget of £31,714,110, which was mostly (78%) attributable to underspends in staff costs resulting from a longer than expected period in filling a number of vacant posts. In 2014, a total of 19 regular budget vacant posts were filled, while a total of 17 posts were additionally vacant

due to staff retirement, separation or transfer/recruitment to other posts, resulting in 355 vacant work-months in total, comprising 127 professional work-months (equivalent to 11 posts) and 228 General Service work-months (equivalent to 19 posts). It should also be noted that the savings in staff costs are due partly to the result of the rationale of the Secretary-General's review and reform initiative which enacted the Secretariat to: critically assess the need for every vacant post; transfer or redeploy posts in line with changes and imbalances in workload within and across divisions; continue to call for secondees and Associate Professional Officers (APOs) from Member States; strictly apply the policy on no contract extensions beyond normal retirement age; reclassify every post to its original grade or less when it is vacated by an incumbent with a personal promotion; and, where applicable, apportion to donor-financed projects the regular budget staff costs associated with their delivery. 60 Another contribution to the underspending in regular budget expenditure can be found in the reduced use of other personnel (temporary assistance, overtime and consultancy), in particular, meetings personnel (translators and interpreters), as a result of on-going effects of the Secretary-General's review and reform exercise, which included various changes in working practices for overtime and the employment of supernumerary staff (e.g. introduction of 1 a.m. deadline; reduction in the number of plenary sessions; more concise reporting; use of compensatory time-off rather than monetary payment for overtime; and strictest enforcement of working hours for interpreters as agreed between the UN and the AIIC). Savings were also made in general operating expenses, resulting from reduced costs in communication through the shift to "papersmart" production of documents and use of internet telephone systems; and cost reductions in IT/SAP maintenance. Other contributors include underspends in travel, by limiting regular missions to the essential minimum level and finding cheaper travel routes whenever possible. Out of the total savings, £1,890,000 has been ring-fenced for transfer to the Headquarters Capital Fund, in accordance with the Council's decision, at its 113th session, to finance a revised 2015 budget under the Fund of £2,840,000 in order to urgently address the requirement for the overall replacement of the sound and simultaneous interpretation system in the Main Hall and Committee Rooms 9 and 10. 61 Actual expenditure in 2014 under the foregoing Fund was £719,068, representing 61% of the final budget for the year. The reason for the comparatively low actual outturn was due to: firstly, the decision to cancel and defer some SAP programme developments, taking the opportunity of the preparation of a new SAP tender package, as the contract with the current service provider is to expire in May 2015, so that value for money on the investment in the SAP system can be achieved; secondly, deadlines missed by the suppliers in delivery of goods and services before 31 December 2014, resulting in the commitments being unaccounted for as expenditure in 2014 in accordance with IPSAS; and, thirdly, extended work for the refurbishment of escalators and lifts, most of which has now been completed, with one residual lift scheduled for completion in mid-2015. 62 The variance between actual expenditure and the final budget shown in the Trading Fund activities for 2014 was an underspend of £304,863 (5%), which is largely related not only to savings in personnel costs (£111,203) but also to economies made both in the logistics operation and expendable supplies as well as in negotiations with external suppliers in the production of IMO publications. In particular, serious reductions in the print run for IMO News, which has now turned into a digital production, are attributable to the saving in production costs as well as lower mailing and storage costs. The underspend, together with the increase in trading income, resulted in a net surplus of £6,203,456 for 2014, which was almost the same amount as the surplus achieved in 2013 of £6,207,683. It should be noted that the actual payment in the budgetary accounting for trading activities shown in Statement Va includes the printing cost of IMO publications and model courses, amounting in total to £1,145,259 for 2014 as recorded under the inventory account (re: Note 2.3) but, in the financial accounting shown in Statement II (re: Note 4.4), the expense recognized for the year is not the printing cost of

the year but the historic cost of only the IMO publications and model courses which are sold, exchanged or distributed in the year in which the related revenue arises. 63 The expenditure status of the Termination Benefit Fund, as at 31 December 2014, shows a budget execution rate of 99% (£850,164) against the final budget for the year. The actual outturn relates to post employment costs associated with annual leave settlements; repatriation grants/travel/shipment of staff members separated or retired from the Organization in 2014; and the medical insurance premiums borne by the Organization under the ASHI scheme in respect of retirees. 64 The outturn in 2014 of £110,621 under the Organization's training and development programme represented 81% of the final budget. Underspends in this Fund (£25,379) were due to the fact that, while human resource development and IT/IS proficiency training programmes were conducted through arrangements with commercial training providers, other needs, in particular for SAP financial management and control processes, have mostly been met through the use of in-house expertise. An induction video film for new staff members was developed with in-house resources and the induction programme for translators was delivered towards the end of the year to avoid disruption in the Organization's meetings. 65 The final budget for the activities financed by the Technical Cooperation Fund comprised the originally approved appropriation for 2014 of £5,159,000 and the budget brought forward from 2013 of £201,904 to finance some postponed activities. Expenditure for 2014 amounted to £3,596,155, accounting for 67% of the final budget and a decrease of £1,058,708 (23%) compared with the outturn in 2013. Reasons for the variance include: unforeseen problems and difficulties in the recipient countries and regions (such as the outbreak of Ebola Virus Disease), which were outside IMO's control, causing deferrals or suspensions of planned activities and missions; unexpected situation changes in Member States, which inhibited the follow-up phase of activities taking place. In other cases, there was a lack of response from the maritime administrations to confirm events or regarding invitations to events. In addition, extra resources made available throughout the year from other sources (various donor/trust funds, industry organizations and partnership arrangements, jointly delivering the programmes) also contributed to the underspend. 66 The 2014 final accounts of WMU are presented in US dollars, whereas IMLI's are presented in Euros, and thus the consolidation of their budgets and actual outturns into Statement Vb, under the heading of Education and research, is expressed in Pounds Sterling using the annual average United Nations operational rates of exchange, which were £0.612 to the US dollar and £0.804 to the Euro in 2014. The expenditure outturn of the two educational institutions amounted to £9,778,602 for 2014, representing an increase of 13% on the previous year's outturn of £8,644,343. Accordingly, the expenditure portion of the two institutions has grown by 3% points to a fifth (20%) of the consolidated outturn of £49,365,031 for the year, from 17% shown in 2013. Underspending in the expenditure budget represented 6% (£581,129) of the final budget of the two Institutions of £10,359,731, which was largely attributable to the savings made in the costs of personnel, administration as well as mission travel. SUSTAINABILITY

67 In considering the Organization's financial sustainability, I have evaluated the consequences of any significant delays or defaults in payments from Member States or any reductions in contributions from donors in the context of the global economic and financial crisis, and whether it would lead to a consequential reduction in the scale of operations and/or the delivery of the Strategic Plan, the High-level Action Plan and the Divisional Business

Objectives. Having considered IMO's projected activities and the corresponding risks, I am confident that the Organization has adequate resources to continue to operate in the medium term. Based on this assumption, we will continue to apply the "going concern" basis in preparing IMO's financial statements. 68 My assertion above is supported by: i) the budget approved by the Assembly for the 2014-2015 biennium; ii) the scope and content of the Strategic Plan prepared for the period 2014-2019; iii) the net assets held at the end of this financial period, which result largely from the austerity and efficiency measures introduced through my review and reform initiative; iv) the high level of collections of the assessed contribution of over 95% for the past 10 years; and v) the trend in donor support that has been sustaining IMO's mandate, including delivery of technical cooperation work, as determined by the Council and Assembly.

IMO in transition

69 In presenting my budget proposal for the 2014-2015 biennium, I stated that, "beyond the simple matter of financial sustainability, it is possible to look ahead and see the 2014-2015 and 2016-2017 biennia as a transitional period for IMO, as we face new priorities and emerging challenges, and as we seek to shape the Organization to face the demands of its stakeholders both now and in the future". 70 I am of the opinion that, as we enter the 2016-2017 biennium, the Organization will continue to be in a period of transition resulting from the consolidation of the outcomes of my review and reform initiative. During my tenure as Secretary-General, I have been pleased to witness the significant effort that has been made – jointly by Member States and the Secretariat – towards my objective of turning IMO into a forward-looking, efficient and cost-conscious specialized agency of the United Nations system with strengthened and knowledge-based authority in global standards setting. These outcomes may be summarized as follows: organizational structures and methods of work have been revisited and reformed; a policy of mixed zero growth is enabling the Organization to follow a path towards financial sustainability and this has resulted in assessments on Member States remaining at the same level over four years; IMO's profile in the broader United Nations context has been raised, particularly on matters regarding unsafe mixed migration by sea; a new approach to technical cooperation has been initiated to address countries' real needs and promote the development of national maritime transportation policies; a fundamental review of the World Maritime University's objectives and activities is being undertaken in order to strengthen its financial sustainability; greater use is being made of ICT to facilitate IMO's regulatory role and its day-to-day operation; increased transparency has been introduced in all areas; the Trading Fund activities continue to prosper; and, in both human resource and financial terms, a new culture of permanent review, succession planning, programming and budgeting has been instilled in what is now a more agile Secretariat.

71 These reforms need further consolidation in the next biennium in order for progress to be made on the following challenges:

the implementation of the mandatory Member State Audit Scheme, as of 1 January 2016, should mark a paradigm shift in the way the Organization works. During the present biennium, we have laid the groundwork for the successful and practical implementation of the Scheme, with a precise mechanism and administrative procedures in place to deliver on Member States' expectations and, for the Scheme's management, an agreed staff complement within an independent Secretariat unit and an approved budget. As we gain experience with the Scheme, and a greater understanding of the effectiveness of Member States' implementation of IMO standards, there will inevitably be cross-over feedback with possible impacts on our regulatory work and on our management of technical cooperation activities;

in respect of the former, the results of audits may lead us towards regulatory reforms, and the ongoing examination of how to reduce administrative burdens and strive for better regulation in order to achieve improved implementation of standards is also germane. In this context, there has been a fairly seamless transition to the new sub-committee structure and IMO's traditional spirit of cooperation has ensured that all teething problems are being resolved swiftly and amicably with no short-term loss of efficiency. Nevertheless, issues of workload, prioritization and methods of work will need to be examined and monitored continuously to secure an enhanced delivery mechanism for the Organization's regulatory work;

in terms of safety, security, facilitation and environmental matters, preparations for the early, effective implementation of the Polar Code will be a priority, in view of its expected entry into force on 1 January 2017, in cooperation with all stakeholders, including the Arctic Council. From the safety perspective, work on the new IGF Code and on follow-up to the Costa Concordia casualty (i.e. damage stability, means of escape, damage control, etc.) will be among the key topics, along with continued GBS implementation and the development of a new SOLAS chapter III and of amendments related to the Deepwater Horizon incident. Further priorities include a potential review of the STCW-F Convention and new inputs related to e-navigation, including a review of the GMDSS, the revision of SOLAS chapter IV, and an evaluation of the Iridium system for use in the GMDSS. On other fronts, the continued review and implementation of the FAL Convention – in particular, single window systems – will be a feature of the next biennium, and a significant part of the Secretariat's efforts will be devoted to enhancing maritime law enforcement in west and central Africa, focussing on multi-agency approaches to maritime governance. From an environmental perspective, key issues remain the facilitation of the entry into force and implementation of the BWM Convention and the energy efficiency of the shipping industry, including the development of further efficiency measures, with a possible international data collection system for ships and, in a related vein, the consideration of potential implications for IMO of a new global climate change agreement;

the Member State audit results will also help shape our future identification of technical assistance requirements and the delivery of technical cooperation for more effective implementation of standards, and this will be complemented by the initiatives I have already introduced (as indicated above) to establish country maritime profiles and to support Member States in developing sustainable maritime policies. Overarching our work in this area, will be the United Nations'

post-2015 development agenda, to which IMO will need to develop appropriate responses both in the capacity building and regulatory fields; and

complimentary to the foregoing is the permanent need for IMO to give priority to maritime education and training in its broadest sense. Human resource development in the maritime sector – and, in particular, the training of future maritime leaders and experts – is fundamental to the promotion of national economies focussed on the seas and oceans and maritime industries, and of the sustainable maritime transportation systems such economies require. For many nations, these are the pathways to development and prosperity, and IMO's capacity building efforts should be geared towards those goals. To those ends, the involvement and support of the World Maritime University and the IMO International Maritime Law Institute will be important and will, in turn, assist those institutions in better defining the roles they must play, through education, training and research, to best meet the needs of IMO Member States.

72 Meeting these challenges will require the continued collective efforts of Member States and the Secretariat, along with the active engagement and participation of other stakeholders in the true IMO spirit of transparency, openness and cooperation.

RESPONSIBILITY

73 As required under financial regulation 12.10, I am pleased to submit the annexed financial statements. I certify that, to the best of my knowledge and information, all transactions during the reporting period have been properly entered in the accounting records of the Organization and that these transactions, together with the financial statements and notes, details of which form part of this document, fairly present the financial position of IMO as at 31 December 2014.

Statement I – Statement of Financial Position as at 31 December 2014 Statement II – Statement of Financial Performance for the year ended 31 December 2014 Statement III – Statement of Changes in Net Assets for the year ended

31 December 2014 Statement IV – Statement of Cash Flow for the year ended 31 December 2014 Statement V – Statement of Comparison of Budget and Actual Amounts for the year

ended 31 December 2014

Notes to the Financial Statements

Signed on original Koji Sekimizu Secretary-General London, 25 May 2015


STATEMENT I

STATEMENT OF FINANCIAL POSITION

as at 31 December 2014 (GBP)

IMO Consolidated

Note 2014 2013 2014 2013

ASSETS

Current assets

Cash and cash equivalents 2.1 52,730,302 47,338,313 61,618,921 56,065,799

Contributions receivable 2.2 797,283 1,180,750 799,750 1,188,256

Inventories 2.3 879,562 756,517 904,054 783,227

Advances to sub-contractors 2.4 115,792 150,616 115,792 150,616

Other receivables 2.5

Relating to exchange transactions 1,818,853 1,629,871 2,735,623 2,291,516

Relating to non-exchange transactions -

-

54,505 13,720

Total current assets 56,341,792 51,056,067 66,228,645 60,493,134

Non-current assets

Property, plant and equipment 2.6 686,271 1,032,177 806,054 1,221,751

Intangible assets 2.7 309,287 229,892 330,280 254,088

Total non-current assets 995,558 1,262,069 1,136,334 1,475,839

TOTAL ASSETS 57,337,350 52,318,136 67,364,979 61,968,973

LIABILITIES

Current liabilities

Payables and accruals 2.8

Relating to exchange transactions (2,909,672) (2,032,316) (3,192,599) (2,452,063)

Relating to non-exchange transactions (3,673,276) (3,664,403)

(7,349,895) (6,917,131)

Provisions and warranties 2.9

Relating to exchange transactions (69,100) (69,765) (69,100) (69,765)

Employee benefits 2.10 (206,318) (217,683) (236,582) (229,039)

Finance lease liabilities 2.11 (53,647) (49,834) (53,647) (49,834)

Total current liabilities (6,912,013) (6,034,001) (10,901,823) (9,717,832)

Non-current liabilities

Employee benefits 2.10 (34,613,137) (33,210,414) (35,029,120) (33,615,703)

Finance lease liabilities 2.11 (35,182) (88,829) (35,182) (88,829)

Total non-current liabilities (34,648,319) (33,299,243) (35,064,302) (33,704,532)

TOTAL LIABILITIES (41,560,332) (39,333,244) (45,966,125) (43,422,364)

NET ASSETS 15,777,018 12,984,892 21,398,854 18,546,609

IMO Consolidated

Note 2014 2013 2014 2013

Fund balances and reserves 2.12 12,984,892 13,516,389

17,717,362 19,351,710

Surplus for the year 2,792,126 (531,497) 3,681,492 (805,101)

TOTAL FUND BALANCES AND RESERVES 2.12 15,777,018 12,984,892

21,398,854 18,546,609

The accompanying notes form an integral part of these financial statements

Signed on original JO Espinoza Ferrey Director, Administrative Division London 2 April 2015


STATEMENT II

STATEMENT OF FINANCIAL PERFORMANCE

for the year ended 31 December 2014

(GBP)

IMO Consolidated

REVENUE Note 2014 2013 2014 2013

Assessed contributions 3.1 30,116,000 30,170,000 30,116,000 30,170,000

Donor contributions 3.2 4,753,099 4,313,117 8,358,044 7,635,835

Commercial activities 3.3 12,638,241 12,191,317 14,120,534 13,778,515

Fellowships 3.4 - - 4,206,935 3,442,155

Other revenue 3.5 297,489 400,803 748,798 681,763

TOTAL REVENUE 47,804,829 47,075,237 57,550,311 55,708,268

EXPENDITURE

Staff and other personnel costs 4.1 (30,848,168) (31,132,173) (36,242,243) (36,478,215)

Travel 4.2 (1,856,941) (2,049,288) (2,266,895) (2,533,380) Supplies, consumables and other running costs 4.3 (5,392,457) (6,201,629) (6,390,431) (7,122,438)

Costs related to trading activities 4.4 (1,720,206) (1,836,130) (1,791,637) (1,903,225)

Outsourced services 4.5 (1,068,958) (1,077,535) (1,287,980) (1,299,429)

Training and development 4.6 (2,995,501) (3,175,548) (4,714,273) (4,696,331)

Currency exchange gains/(losses) 4.7 883,230 (598,453) 871,721 (829,735) Depreciation, amortization and impairment 4.8 (1,033,126) (625,761) (1,176,904) (772,489)

Return of unspent funds 4.9 (48,644) - (48,644) -

Other expenses 4.10 (931,932) (910,217) (821,533) (878,127)

TOTAL EXPENDITURE (45,012,703) (47,606,734) (53,868,819) (56,513,369)

SURPLUS/(DEFICIT) FOR THE YEAR 2,792,126 (531,497) 3,681,492 (805,101)



STATEMENT III

STATEMENT OF CHANGES IN NET ASSETS


(GBP)

Note Accumulated Surpluses/

Fund Balances Accumulated Surpluses/

Fund Balances

IMO Consolidated

2014 2013 2014 2013

Opening balance 1 January 12,984,892 15,369,890 18,546,609 21,114,257

Surplus for the year 2,792,126 (531,497) 3,681,492 (805,101)

Other movements on reserves

Transfers (935,703)

Actuarial losses for the year 2.10 - (1,853,501) - (1,853,501)

Exchange rate effect 10 - - 106,456 90,954

Total movement for the year 2,792,126 (2,384,998) 2,852,245 (2,567,648)

TOTAL NET ASSETS

15,777,018 12,984,892 21,398,854 18,546,609



STATEMENT IV

STATEMENT OF CASH FLOW


(GBP)

Note

IMO

Consolidated

2014 2013

2014 2013

Cash flow from operating activities:

Surplus/(deficit) for the period4 2,058,803 (60,002) 2,991,914 (150,520)

Interest earned 3.5 239,073 184,328 248,403 233,429

Decrease in contributions receivable 2.2 383,467 709,806 388,506 709,689

(Increase) in inventories 2.3 (123,045) (43,891) (120,827) (41,336)

Decrease in advances to sub-contractors 2.4 34,824 119,313 34,824 119,313

(Increase)/decrease in other receivables 2.5 (188,982) 90,992 (484,892) (90,370)

Depreciation of property, plant and equipment5 2.6 449,970 350,224 597,063 492,384

(Gain) on disposal of Property, Plant and Equipment 2.6 (1,219) (6,556) (1,219) (5,742)

Donation of assets 2.6 467,449 66,572 467,449 66,572

Amortization of intangible assets4 2.7 98,939 124,344 114,023 132,240

Increase/(decrease) in payables and accruals 2.8 886,229 (1,939,033) 1,173,300 (1,889,574)

(Decrease) in provisions and warranties 2.9 (665) (2,460) (665) (2,460)

Increase in employee benefit liabilities 2.10 1,391,358 3,540,463

1,420,960 3,388,549

Net cash flows from operating activities 5,696,201 3,134,100 6,828,839 2,962,174

Cash flows from investing activities:

Purchases of property, plant and equipment4 2.6 (569,303) (938,882) (648,136) (1,018,627)

Purchases of intangible assets4 2.7 (178,334) (217,748) (190,215) (241,835)

Donations received for property, plant and equipment (2,835) - (2,835) -

Proceeds from sale of property, plant and equipment 1,844 10,946 3,375 10,946

Net cash flows from investing activities (748,628) (1,145,684) (837,811) (1,249,516)

Cash flows from financing activities:

(Decrease)/increase in finance lease liabilities 2.11 (49,834) 93,245 (49,834) 93,245

Net cash flows from financing activities (49,834) 93,245 (49,834) 93,245

Other movements in net assets - (1,853,501)

(935,703) (1,853,501)

Gain on exchange on consolidation - -

106,456 90,954

Effect of exchange rate changes on cash and cash equivalents 494,250 (655,823) 441,175 (888,010)

Net increase/(decrease) in cash and cash equivalents 2.1 5,391,989 (427,663)

5,553,122 (844,654)

Cash and cash equivalents at beginning of the year 47,338,313 47,765,976

56,065,799 56,910,453

Cash and cash equivalents at end of the year 2.1 52,730,302 47,338,313

61,618,921 56,065,799


4 Excluding interest earned of £239,073 (2013:£184,328) for IMO and £248,403 (2013:£233,429) for the consolidated group

and gains on exchange of cash and cash equivalents held of £494,250 (2013: losses of £655,823) for IMO and £411,175 (2013:loss of £888,010) for the consolidated group.

5 Depreciation of property, plant and equipment, amortization of intangible assets, purchases of property, plant and equipment and

purchases of intangible assets include the effect of the exchange rate adjustment for exchange rate movements in the year. Notes 2.6 and 2.7 show additions and foreign exchange adjustments separately rather than in aggregate.


STATEMENT Va STATEMENT OF COMPARISON OF BUDGET AND ACTUAL AMOUNTS – IMO

for the year ended 31 December 2014 (GBP)

Budget Amounts 2 Actual Amounts on Comparable Basis 2

Variances: Final Budget and Actual Amounts

Original Original Final Final

2014 2013 2014 2013 2014 2013 2014 2013 Receipts1

Assessed contributions 30,116,000 30,170,000 30,116,000 30,170,000 29,852,543 30,361,645 (263,457) 191,645

Support costs income 1,420,000 1,376,000 1,420,000 1,376,000 1,302,367 1,342,894 (117,633) (33,106)

Trading income 11,837,600 10,527,000 11,837,600 10,527,000 11,722,831 11,875,566 (114,769) 1,348,566

Regular budget other income 150,000 140,000 150,000 140,000 201,804 257,212 51,804 117,212

Total receipts 43,523,600 42,213,000 43,523,600 42,213,000 43,079,545 43,837,317 (444,055) 1,624,317

Payments 1

Regular budget strategic results 31,686,000 31,686,000 31,714,110 31,697,800 28,791,046 29,012,528 2,923,064 2,685,272

Trading 5,824,000 6,195,000 5,824,238 6,197,500 5,519,375 5,667,883 304,863 529,617

Headquarters capital 930,000 1,194,000 1,185,359 1,431,600 719,068 1,013,380 466,291 418,220

Termination/separation 844,000 980,000 859,500 980,000 850,164 962,150 9,336 17,850

Training and development 136,000 142,600 136,000 142,600 110,621 95,241 25,379 47,359

Technical cooperation 5,159,000 4,645,000 5,360,904 4,961,500 3,596,155 4,654,863 1,764,749 306,637

Total payments 44,579,000 44,842,600 45,080,111 45,411,000 39,586,429 41,406,045 5,493,682 4,004,955

Net (1,055,400) (2,629,600) (1,556,511) (3,198,000) 3,493,116 2,431,272 5,049,627 5,629,272

1 Classification of receipts or payments follows the same basis as the approved budget and is different from the classification shown in Statement II which presents it by nature/function. 2 Budget amounts are the modified accrual basis adopted in the budget preparation and approved by the Assembly/Council and the actual amounts are on the same basis as the budget amounts.


STATEMENT Vb STATEMENT OF COMPARISON OF BUDGET AND ACTUAL AMOUNTS – Consolidated

for the year ended 31 December 2014 (GBP)

Budget Amounts 2

Actual Amounts on Comparable Basis 2

Variances: Final Budget and Actual Amounts

Original Original Final Final

2014 2013 2014 2013 2014 2013 2014 2013 Receipts1

Assessed contributions 30,116,000 30,170,000 30,116,000 30,170,000 29,852,543 30,361,645 (263,457) 191,645

Support costs income 1,420,000 1,376,000 1,420,000 1,376,000 1,302,367 1,342,894 (117,633) (33,106)

Trading fund income 11,837,600 10,527,000 11,837,600 10,527,000 11,722,831 11,875,566 (114,769) 1,348,566

Regular budget other income 150,000 140,000 150,000 140,000 201,804 257,212 51,804 117,212

Education and research 9,518,060 8,309,808 10,622,108 8,777,813 10,532,575 9,114,092 (89,533) 336,279

Total receipts 53,041,660 50,522,808 54,145,708 50,990,813 53,612,120 52,951,409 (533,588) 1,960,596

Payments 1

Regular budget strategic results 31,686,000 31,686,000 31,714,110 31,697,800 28,791,046 29,012,528 2,923,064 2,685,272

Trading 5,824,000 6,195,000 5,824,238 6,197,500 5,519,375 5,667,883 304,863 529,617

Headquarters capital 930,000 1,194,000 1,185,359 1,431,600 719,068 1,013,380 466,291 418,220

Termination/separation 844,000 980,000 859,500 980,000 850,164 962,150 9,336 17,850

Training and development 136,000 142,600 136,000 142,600 110,621 95,241 25,379 47,359

Technical cooperation 5,159,000 4,645,000 5,360,904 4,961,500 3,596,155 4,654,863 1,764,749 306,637

Education and research 9,203,725 8,250,858 10,359,731 8,621,848 9,778,602 8,644,343 581,129 (22,495)

Total payments 53,782,725 53,093,458 55,439,842 54,032,848 49,365,031 50,050,388 6,074,811 3,982,460

Net (741,065) (2,570,650) (1,294,134) (3,042,035) 4,247,089 2,901,021 5,541,223 5,943,056

1 Classification of receipts or payments follows the same basis as the approved budget and is different from the classification shown in Statement II which presents it by nature/function.

2 Budget amounts are the modified accrual basis adopted in the budget preparation and approved by the Assembly/Council and the actual amounts are on the same basis as the budget amounts.

NOTES TO THE FINANCIAL STATEMENTS AS AT 31 DECEMBER 2014

NOTE 1: ACCOUNTING POLICIES Basis of Preparation

1 The financial statements of the International Maritime Organization (IMO) have been prepared on the accrual basis of accounting in accordance with the International Public Sector Accounting Standards (IPSAS) using the historic cost convention. The appropriate International Financial Reporting Standard (IFRS) has been applied where an IPSAS does not address a particular issue. No Standards have been adopted prior to their required implementation date, and no transitional provisions are in operation. 2 The Cash Flow Statement is prepared using the indirect method. 3 Within the meaning of IPSAS 6 – "Consolidated and Separate Financial Statements" the Organization is a controlling entity with two controlled entities, the World Maritime University (WMU) and the IMO International Maritime Law Institute (IMLI) based in Sweden and Malta, respectively. Neither WMU nor IMLI has equity and the Organization's control is not by means of shareholding; however, their Charter and Statute, respectively, provide for the "power" and 'benefit' criteria necessary for establishing control under IPSAS 6, the key factors being:

the Secretary-General's ability to appoint key staff, both management and academic, and also to appoint the respective governing boards;

the alignment of the objectives of WMU and IMLI with the goals of IMO through the Charter and the Statute, respectively; and

the requirement for changes to the Charter and Statute to be approved by IMO organs.

4 Consolidated statements have therefore been prepared and are shown alongside those of IMO alone for ease of reference. 5 The functional and reporting currency of IMO is GBP. Transactions in currencies other than GBP are converted into GBP at the prevailing United Nations Operational Rates of Exchange (UNORE) at the time of transaction. Assets and liabilities held at the year-end in currencies other than GBP are converted into GBP at the prevailing UNORE year-end closing rate. Resulting gains or losses are accounted for in the Statement of Financial Performance.

Cash and Cash Equivalents

6 Cash and cash equivalents comprise cash on hand, cash at banks and investments held to maturity. Fixed-term deposits placed with counterparties are considered to be receivables within the meaning of IPSAS 29 – "Financial Instruments: Recognition and Measurement", and consequently are initially measured at their fair value, and subsequently at amortized cost using the effective interest method.

Contributions and Receivables

7 Assessed income on Member States is recognized as revenue when it falls due, normally on 1 January of the financial year for which the assessment is made. 8 Contributions are recognized as an asset when confirmed in writing by donors, with revenue normally being recognized at the same point. However, in some cases a donor

agreement may contain sufficiently strict conditions over the application of funds to a specific activity that a liability is recognized along with the asset when the agreement is confirmed in writing and revenue is only recognized as the activity is delivered. The accounting treatment of donor contributions is determined on a case-by-case basis following the provisions of IPSAS 23 – "Revenue from Non-Exchange Transactions". 9 Even in the absence of conditions as defined in IPSAS 23, contributions from donors are typically received with restrictions over their use and are not available for the Organization's use entirely at its own discretion. Balances of reserves by fund are disclosed in Note 2.12, with all balances held under Bilateral Operations and Multi-Donor Trust Funds (MDTF) being subject to restrictions imposed either through the terms of the bilateral agreement or the Terms of Reference of the MDTF, respectively, and such reserves may only be used in accordance with these restrictions. 10 Receivables are stated at nominal value less allowance for estimated irrecoverable amounts and discounted, where appropriate, if cash flows are not expected within 12 months from the reporting date. 11 In-kind contributions of goods are valued at fair market value and are recognized as revenue and as assets when received. In-kind contributions of services are not recognized in the financial statements.

Revenue

12 The Organization's commercial sales operations, conducted through the Trading Fund, and the fees charged to those submitting products and substances for technical assessment in order for the Organization to fully recover costs associated with conducting those assessments, are considered to be exchange transactions within the meaning of IPSAS 9 –"Revenue from Exchange Transactions". All other revenue is on a non-exchange basis and is accounted for in accordance with IPSAS 23. 13 Revenue from the sale of publications is recognized upon shipment to the customer, with the exception of consignment stock held on the Organization's behalf by distributors under agreements where the Organization retains the risks and rewards of ownership. Sales of such consignment stock are recognized as sales when made by the distributor to the end customer.

Inventories

14 Publications held for sale on hand at the end of the financial period are recorded as inventories and are valued at the lower of cost or net realizable value. 15 The cost of publications includes purchase cost, transportation and delivery costs, determined on a weighted average basis. Publications held by distributors under a consignment stock arrangement continue to be shown as the Organization's asset until their sale by the distributor. 16 Publications are shown as a cost of sales at the time at which the sale is recognized, and the inventory is reviewed at the end of each financial year for obsolescence. 17 Obsolete books are held at nil value until their disposal. 18 Slow-moving titles, with an excess of three years' stock on hand, are considered to be impaired, with a 50% reduction in value.

19 No publications are held solely for distribution on a free of charge basis. Such distributions typically represent less than 5% of all publications distributed. Consequently, no provision is made in this regard.

Property, Plant and Equipment

20 Property, Plant and Equipment (PP&E) are stated at historical cost less accumulated depreciation and any impairment losses. Depreciation is provided for PP&E over their estimated useful life using the straight line method. The estimated useful life for PP&E classes are as follows: 21 Leasehold improvements are recognized as assets and valued at cost, and depreciated over the lesser of the remaining useful life of the improvements or the lease term. 22 While the Organization uses an operational threshold for recognizing property, plant and equipment of £500, this threshold is not applied to library collections. Where a library collection is deemed to be in excess of 10% reference in nature, all purchases of reference material are capitalized and depreciated over three years on a straight line basis. Where a library collection holds less than 10% reference books, all items will be expensed as purchased. 23 Impairment reviews are undertaken for all assets at least annually.

Intangible Assets

24 Intangible assets are stated at historical cost less accumulated amortization and any impairment losses. 25 Publication titles are not considered to be intangible assets as they do not meet the provisions of IPSAS 31 - 'Intangible Assets'. Consequently, development costs for new titles are expensed as they are incurred. 26 Amortization is provided over the estimated useful life using the straight line method. The estimated useful life for intangible asset classes are as follows:

Class Estimated useful life

(years)

Software acquired externally 3

Internally developed software 3 - 6

Class Estimated useful life (years)

Communication and IT equipment 3 - 5

Vehicles 4 - 7

Furniture & fixtures 5

Conference equipment 7

Miscellaneous 5

Leases

Finance Leases 27 Leases under which substantially all of the risk and reward of ownership have been transferred to the Organization through the lease agreement are treated as finance leases. 28 Assets purchased under a finance lease are shown as assets at the lower of the fair value of the asset and the present value of the minimum lease payments. An associated lease obligation is recognized at the same value. 29 Lease payments made under a finance lease are apportioned between payment of finance charges and reduction of the balance of the liability. 30 Assets acquired through a finance lease are depreciated over the shorter of the lease term or the useful life of the asset, except where such assets become the property of the Organization on completion of the lease term. In such cases, the asset is depreciated over its useful life. The finance charge will be calculated so as to produce a constant periodic rate of interest on the remaining balance of the liability. Operating Leases 31 Leases which are not categorized as finance leases, with a balance of risk and reward remaining with the lessor, are considered to be operating leases. 32 Expenditure incurred under an operating lease is charged on a straight-line basis over the life of the lease.

Employee Benefits Liabilities 33 IMO recognizes the following categories of employee benefits:

short-term employee benefits due to be settled within 12 months after the end of the accounting period in which employees render the related service;

post-employment benefits;

other long-term employee benefits; and

termination benefits. 34 IMO is a member organization participating in the United Nations Joint Staff Pension Fund (UNJSPF), which was established by the United Nations General Assembly to provide retirement, death, disability and related benefits to employees. The Pension Fund is a funded, multi-employer defined benefit plan. As specified by Article 3(b) of the Regulations of the Fund, membership in the Fund shall be open to the specialized agencies and to any other international, intergovernmental organization which participates in the common system of salaries, allowances and other conditions of service of the United Nations and the specialized agencies. Certain categories of employees of IMO are members of the UNJSPF. 35 The plan exposes participating organizations to actuarial risks associated with the current and former employees of other organizations participating in the Fund, with the result that there is no consistent and reliable basis for allocating the obligation, plan assets, and costs to individual organizations participating in the plan. IMO and the UNJSPF, in line with the other participating organizations in the Fund, are not in a position to identify IMO's proportionate share of the defined benefit obligation, the plan assets and the costs associated with the plan with sufficient reliability for accounting purposes. Hence, IMO has treated this plan as if it were

a defined contribution plan in line with the requirements of IPSAS 25. IMO's contributions to the plan during the financial period are recognized as expenses in the statement of financial performance. 36 Actuarial gains and losses which may arise from experience adjustments and changes in actuarial assumptions are recognized in the period in which they occur as a separate item directly in net assets/equity. Past service costs from amendments to the benefits provided by the plans are recognized in surplus or deficit over the average remaining service lives of the related employees if they are not vested, and immediately when they arise if the benefits are already vested. None of the benefits of the Organization's defined benefits plans have been amended during the reporting period. 37 Termination benefits include indemnities for dismissal before retirement or voluntary redundancy. Where, at the reporting date, there is a formal plan, without realistic possibility of withdrawal, to finish the employment of a staff member and at that date the staff member has not separated yet from the Organization, an accrual is recognized in the financial statements.

Provisions and Contingent Liabilities

38 Provisions are made for future liabilities and charges where IMO has a present legal or constructive obligation as a result of past events and it is probable that IMO will be required to settle the obligation. 39 A high proportion of the Organization's sales of publications are made through distributors rather than directly to the end user. It is the Organization's established business practice to refund distributors for unsold copies held by them, which may become obsolete through the issuance of a new edition. A provision is established to reflect an approximation of the funds expected to be reimbursed to distributors for the copies sold to them during the financial year which may be returned during future financial years. This liability is estimated using a percentage of the previous financial year sales based on the historical levels of returns. 40 Other commitments, which do not meet the recognition criteria for liabilities, are disclosed in the notes to the financial statements as contingent liabilities when their existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events which are not wholly within the control of IMO. Fund Accounting and Segment Reporting

41 The financial statements are prepared on a fund accounting basis, showing, at the end of the period, the consolidated position of all IMO funds. A fund is a self-balancing accounting entity established to account for the transactions of a specified purpose or objective. Fund balances represent the accumulated residual of revenue and expenses. 42 IMO classifies all projects, operations and fund activities into four segments: i) Core Programme Management; ii) Technical Cooperation and Extra-budgetary Activities; iii) Trading and Business Activities; and iv) Education and Research. IMO reports on the transactions of each segment during the financial period, and the balances held at the end of the period. 43 Under Core Programme Management, the Organization provides services to support Member States' decision making, including the development of treaties, regulations and policies. These activities are funded by assessed contributions and transfers from surpluses from such contributions. The Organization's General Fund, Working Capital Fund, Headquarters Capital Fund, Training and Development Fund and Termination Benefit Fund are grouped under this segment.

44 Under Technical Cooperation and Extra-budgetary Activities, the Organization provides Member States with technical cooperation and extra-budgetary planning and implementation services. Such activities are primarily funded through the surplus of the Organization's commercial activities and through contributions from donors or through a cost recovery model such as the fees charged for assessments of products and substances. In this context, the Organization's Technical Cooperation Fund and all donor trust Funds are grouped under this segment. 45 Activities conducted by WMU and IMLI are categorized under the Education and Research segment. The Organization provides both internal and external training services, including the activities of WMU and IMLI. Funding is primarily derived from donations to and fees charged by WMU and IMLI, and partly through the surplus of the Organization's commercial activities. 46 As the Organization undertakes commercial business activities, in particular, of publishing and catering, through the Trading Fund, those activities are segmented under Trading and Business Activities. Funding comes from the sale of publications and catering.

Budget Comparison

47 The Assembly approves the biennial budgets of the Organization which include regular budget strategic results and budgets of the Trading Fund, the Headquarters Capital Fund, the Training and Development Fund, the Termination Benefit Fund and the Technical Cooperation Fund, which may be subsequently amended by the Council or through the exercise of delegated authority. Statement V: Comparison of Budget and Actual Amounts compares the final budget to actual amounts calculated on the same basis as the corresponding budgetary amounts. As the bases used to prepare the budget and financial statements differ, Note 5 provides a reconciliation between the actual amounts presented in Statement V and the actual amounts presented in Statement IV: Cash Flow. NOTE 2: ASSETS AND LIABILITIES Note 2.1: Cash and Cash Equivalents

IMO Consolidated

2014 2013 2014 2013

GBP GBP

Cash and Cash Equivalents

Bank and cash on hand 10,140,939 8,084,073 16,995,506 15,286,264

Short-term deposits 42,587,020 39,252,399 44,607,685 40,764,784

Other cash and cash equivalents 2,343 1,841 15,730 14,751

Total Cash and Cash Equivalents

52,730,302 47,338,313 61,618,921 56,065,799

48 Cash required for immediate disbursement is maintained in cash and bank accounts. Balances in the money market and deposit accounts are available at short notice. 49 The Organization does not place long-term investments in bonds or shares, nor does it make use of money market facilities such as hedging. Short-term deposits are investments held to maturity invested for a maximum of twelve months with an approved list of counterparties. Those deposits held at year end are measured at amortised cost, that is discounted, using the effective interest method. The Organization's Treasury Policy,

established in accordance with Article IX of the Financial Regulations, focuses on capital retention rather than maximization of return on investment. 50 The Treasury Policy establishes limits on the maximum amounts and time period for deposits with any counterparty, on the basis of their long-term credit ratings, in order to diversify and manage investment risk. 51 Effective implementation of the Treasury Policy is the responsibility of the Treasury Committee, comprising senior administrative and financial staff, along with an external expert financial adviser. The Committee meets monthly and considers an investment proposal, along with information on the current cash position, cash flow projections and surplus funds available to invest together with the proposed counterparties and their credit ratings. 52 The table below shows the value of IMO's short-term deposit placements at 31 December 2014 split by maturity date:

IMO

GBP USD

Maturity

January 12,583,920 4,204,565

February 14,321,465 6,079,664

March 5,433,471 5,629,121

Total short term deposits 32,338,856 15,913,350

53 There was no impairment of short-term deposits as at 31 December 2014. 54 The consolidated figure for other cash and cash equivalents includes two investments in Malta Government stocks totalling £11,601, being stocks with a nominal value of €1,500 at 4.5% maturing in 2017 and paying interest in May and November; and stocks with a nominal value of €12,000 at 5.25% maturing in 2030 and paying interest in June and December. The annual implied interest rate for these investments is 3.88% and 4.8% respectively, and both investments are held as being available for sale.

Note 2.2: Contributions Receivable

IMO Consolidated

2014 2013 2014 2013

GBP GBP

Composition:

Member States 328,803 122,663 328,803 122,663

Donor contributions 468,480 1,058,087 470,947 1,065,593

Total Contributions Receivable 797,283 1,180,750 799,750 1,188,256

55 All contributions receivable, whether for Member States' assessments or donor contributions, relate to non-exchange transactions.

IMO Consolidated

2014 2013 2014 2013

GBP GBP

Member States' assessments due 1,117,251 853,257 1,117,251 853,257

Total Contributions Receivable before allowance

1,117,251 853,257 1,117,251 853,257

Fair value adjustments (433,384) (375,530) (433,384) (375,530)

Allowance for doubtful accounts (355,064) (355,064) (355,064) (355,064)

Net Contributions Receivable 328,803 122,663 328,803 122,663

56 The following table illustrates the composition of Member States' receivables only.

IMO Consolidated

2014 2013 2014 2013

GBP % GBP % GBP % GBP %

Year of assessment:

2014 337,936 30 - - 337,936 30 - -

2013 85,036 8 151,113 18 85,036 8 151,113 18

2012 52,927 5 61,314 7 52,927 5 61,314 7

2011 and earlier 641,352 57 640,830 75 641,352 57 640,830 75

Nominal value of assessments receivable

1,117,251 100 853,257 100 1,117,251 100 853,257 100

57 Historical experience has shown that assessments due from Member States are highly likely to be settled in full at some point in the future, with no write-offs having been authorised in this regard since the inception of the Organization. However, because there is significant uncertainty surrounding the timing of future cash flows from such receivables, an adjustment is required to show these amounts at fair value.

58 The movements of the allowance for fair value adjustment and doubtful accounts during 2014 are as follows:

Opening Balance 1.1.2014

Increase/ (Decrease)

Closing Balance

31.12.2014

GBP

Fair value adjustment for Member States' arrears - IMO

375,530 57,854 433,384

Fair value adjustment for Member States' arrears - Consolidated

375,530 57,854 433,384

Total allowance for doubtful accounts - IMO

355,064 - 355,064

Total allowance for doubtful accounts - Consolidated

355,064 - 355,064

59 As at 31 December 2014 there were a total of 41 Member States with outstanding balances. Of these, 35 had current year and prior year balances only. The remaining six had arrears prior to 2012. No Member State had an agreed payment plan in place for outstanding arrears as at 31 December 2014. For the Member States in arrears and without such an agreement, an approximation is made based on historical experience – for those Member States which had arrears extending only to the current year and prior year, no fair value adjustment is made. For the remaining Member States with arrears for 2012 and earlier, it was assumed that the eventual cash flows will be sufficiently far in the future that the present value of those cash flows after discounting is approximately zero.

60 The settlement of the former Socialist Federal Republic of Yugoslavia (SFRY) arrears of £355,064 continues to depend on the results of ongoing negotiations at the United Nations regarding succession issues. The Governments of the successor States of the former SFRY have requested the United Nations to write off all debts of the former SFRY relating to their contributions to the United Nations and its specialized agencies and programmes. The United Nations had taken the view that, in accordance with the general rules of international law regarding the succession of States in respect of State debts, the United Nations has the right to seek payment of all or part of the pre-dissolution arrears from the five successor States of the former Yugoslavia. Despite requests for the debt to be written off, the United Nations has refused to do so. The precise amount owing by each of SFRY's five successor States has not as yet been determined by the United Nations. Until this issue is settled by the United Nations, the Secretariat is not in a position to pursue the recovery of the outstanding amount, and the Secretariat's policy in this regard is consistent with prior years and the approach taken by the United Nations.

61 Contributions receivable from donors include: amounts due but not yet received under signed donor agreements, other than those amounts for future periods dependent on the successful completion of earlier phases of work.

62 Contributions receivable from donors are shown net of contributions adjustments related to allowance for doubtful accounts based on an individual review of each receivable. Amounts due beyond 2015 are discounted based on likely timings of such future cash flows. A review of amounts due as at 31 December 2014 indicated that no such adjustments were required on outstanding balances.

63 In the case of both Member State assessments and donor contributions due, adjustments are made to better reflect the fair value of the receivables in the financial statements but constitute neither a formal write-off of the receivable nor a releasing of the third party from their obligation.

Note 2.3: Inventories

IMO Consolidated

2014 2013 2014 2013

GBP GDP

GBP

IMO publications 853,222 745,670 853,222 745,670

Model courses 26,340 10,847 26,340 10,847

Public relations articles - - 24,492 26,710

Total Inventories 879,562 756,517 904,054 783,227

Inventories reconciliation 2014 2013

GBP

Opening inventories 756,517 712,626

Purchases 1,145,258 1,184,597

Total inventories available for sale 1,901,775 1,897,223

Cost of sales (964,897) (1,015,068)

Cost of free distributions (42,658) (33,295)

Adjustments following physical inventory count 3,329 (1,167)

Write-off of publications (7,285) (49,031)

Impairment loss of publications (10,702) (42,145)

Total inventories 879,562 756,517

Opening Balance 01.01.14

Utilization Increase Closing Balance 31.12.14

GBP

Allowance for impairment - obsolete books

42,154 (42,136) 10,702 10,720

Total allowance 42,154 (42,136) 10,702 10,720

64 A periodic review indicated no need for an allowance for impairment for slow-moving titles at any point during the year. 65 Inventory quantities are validated by physical stock counts and valued at weighted average cost including transportation and delivery costs. 66 The Organization does not hold any specific item of inventory for the purpose of distributing free of charge. While a small number of copies of various publications are distributed 'free of charge' from time to time under specific conditions, these free copies constitute an insignificant percentage (typically less than 5%) of the total books distributed. Consequently the valuation of inventory as a whole may reasonably be made on the basis of the lower of cost or (commercial) net realizable value. 67 Inventories include consignment stock held at distributor premises for which the Organization continues to bear the risk and reward until the point of sale by the distributor. The value of the consignment stock as at 31 December 2014 held at distributor premises amounts to £95,967 (2013: £100,165) of which £95,573 (2013: £99,928) is for IMO Publications and £394 (2013: £237) for Model Courses.

68 As at 31 December 2014, WMU held inventory of public relations articles valued at £24,492 (2013:£26,710).

Note 2.4: Advances to Sub-Contractors

69 Advances to sub-contractors are payments made under contract with regional bodies and similar organizations which, acting as implementing agents, deliver technical cooperation programmes on the Organization's behalf. These advances are then offset against approved expenditure reports as the contract is delivered. In addition, advances made to UNDP to deliver regional services on the Organization's behalf, through the Service Clearing Account arrangement, are also considered to be advances to sub-contractors. The outstanding advances at the end of the period were to:

IMO

2014 2013

GBP

COCATRAM 37,656 41,161

REMPEITC-CARIB 23,729 15,739

SACEP 21,022 23,875

Other 33,385 69,841

115,792 150,616

Note 2.5: Other Receivables

IMO Consolidated

2014 2013 2014 2013

Relating to exchange transactions

Advances to vendors 56,435 21,339 315,066 306,724

Advances to staff 814,877 794,148 817,789 794,500

Taxes recoverable 809,461 327,952 858,427 369,946

Fellowships - - 294,630 83,342

Miscellaneous 138,080 486,432 449,711 737,004

1,818,853 1,629,871 2,735,623 2,291,516

Relating to non-exchange transactions

Fellowships - - 30,025 -

Taxes recoverable - - 10,043 8,656

Other - - 14,437 5,064

- - 54,505 13,720

Total Other Receivables 1,818,853 1,629,871 2,790,128 2,305,236

70 Advances to vendors are for payments in advance of goods and service delivery. 71 Advances to staff are for Education Grants, travel and other staff entitlements made in accordance with the Staff Regulations and Staff Rules. The most significant are shown below:

IMO Consolidated

2014 2013 2014 2013

GBP GBP

Advances to staff

Education Grant advance 613,064 593,631 613,064 593,631

Season ticket loan 42,480 41,600 42,480 41,600

Home leave prepayment 84,273 73,580 84,273 73,779

Others 75,060 85,337 77,972 85,490

Total 814,877 794,148 817,789 794,500

72 Education Grant advances are paid annually to eligible staff and are amortized over the academic year for expenditure recognition purposes. 73 Season ticket loans to staff are typically recovered through eleven equal deductions from the payroll. 74 Eligible staff receive one home leave travel entitlement in a two year period, the costs of which are spread over that two year period, which may result in a prepayment where staff travel in the first year of their entitlement or an accrual where travel is primarily to be taken in the second year of entitlement. 75 Taxes recoverable are VAT, airport tax, insurance premium tax and environment tax, which are recoverable from the government of the host country under the terms of the relevant host country agreement. 76 Fellowships are due at the start of the school term upon arrival and confirmation of physical presence of the student. 77 The miscellaneous category includes amounts due under sub-letting agreements (where IMO manages the office space and recovers from third parties), students' advances and insurance claims in respect of WMU and bank interest receivable for IMLI.

Note 2.6: Property, Plant and Equipment

Asset category – IMO

Assets Under Construction

Communication & IT equipment

Conference equipment

Vehicles Furniture &

fixtures Leased

equipment Miscellaneous Total

Cost GBP

Opening Balance 01.01.2014 50,058 2,409,235 710,589 146,471 564,315 226,924 47,618 4,155,210

Adjustments - 657 - - - - - 657

Additions 440,143 79,814 - 19,300 6,577 - 25,721 571,555

Disposals - (1,389) - (16,734) - - (11,035) (29,158)

Donation of Assets (467,449) - - - - - - (467,449)

Closing Balance 31.12.2014 22,752 2,488,317 710,589 149,037 570,892 226,924 62,304 4,230,815

Accumulated Depreciation

Opening Balance 01.01.2014 - (1,717,844) (663,536) (99,784) (511,994) (90,129) (39,746) (3,123,033)

Adjustments - (74) - - - - - (74)

Disposals - 764 - 16,734 - - 11,035 28,533

Depreciation charge for the year - (341,029) (8,999) (26,608) (17,325) (52,307) (3,702) (449,970)

Closing Balance 31.12.2014 - (2,058,183) (672,535) (109,658) (529,319) (142,436) (32,413) (3,544,544)

Net Book Value

Opening Balance 01.1.2014 50,058 691,391 47,053 46,687 52,321 136,795 7,872 1,032,177

Closing Balance 31.12.2014 22,752 430,134 38,054 39,379 41,573 84,488 29,891 686,271

78 Property, plant and equipment are capitalized if their cost is greater than or equal to the threshold limit set at £500. The asset's value, less any estimated disposal price, is depreciated over the asset's estimated useful life using the straight line method. The threshold level is reviewed periodically. 79 Assets are reviewed annually to determine if there is any impairment in their value. During 2014, six items of property, plant and equipment were disposed of, primarily due to obsolescence. Four of the disposed items were fully depreciated at the time of disposal, with one realising proceeds of £1,257. The remaining two items had a net book value on disposal of £625 with one of them being replaced by the supplier under warranty. No assets held at the end of the year were deemed to be impaired. 80 The IMO Headquarters building is not part of property, plant and equipment as the IMO is a tenant in the building under a lease which is deemed to be an operating lease under the provisions of IPSAS 13. Further disclosures on the treatment of this lease are provided in Note 2.11.2. 81 The balance at year-end also reflects assets under construction in the field, most notably Search and Rescue (SAR) equipment in the Republic of the Congo as part of an ongoing programme to support the region in this respect. Provision of these assets is in line with the Organization's objectives. Control is transferred to the relevant third party on completion of the project, therefore SAR assets currently in construction remain under the Organization's control at year-end.

Asset category – consolidated


Communication & IT equipment

Conference equipment

Vehicles Furniture &

fixtures Leased

equipment Miscellaneous Total

Cost GBP

Opening Balance 01.01.2014 50,058 2,839,067 710,589 242,272 670,299 226,924 131,635 4,870,844

Adjustments - 657 - - - - - 657

Additions 440,143 125,095 - 19,300 8,459 - 37,578 630,575

Disposals - (5,970) - (16,734) - - (11,035) (33,739)

Donation of Assets (467,449) - - - - - - (467,449)

Movements as a result of exchange differences

- 22,486 - (1,905) 1,973 - (2,741) 19,813

Closing Balance 31.12.2014 22,752 2,981,335 710,589 242,933 680,731 226,924 155,437 5,020,701

Accumulated Depreciation

Opening Balance 01.01.2014 - (2,012,164) (663,536) (180,175) (609,428) (90,130) (93,660) (3,649,093)

Adjustments - (74) - - - - - (74)

Disposals - 3,814 - 16,734 - - 11,035 31,583

Depreciation charge for the year - (441,676) (8,999) (36,861) (20,814) (52,307) (20,392) (581,049)

Movements as a result of exchange differences

- (18,357) - 1,673 (1,834) - 2,504 (16,014)

Closing Balance 31.12.2014 - (2,468,457) (672,535) (198,629) (632,076) (142,437) (100,513) (4,214,647)

Net Book Value

Opening Balance 01.1.2014 50,058 826,903 47,053 62,097 60,871 136,794 37,975 1,221,751

Closing Balance 31.12.2014 22,752 512,878 38,054 44,304 48,655 84,487 54,924 806,054

82 The total value reported under "Miscellaneous" as at 31 December 2014 includes the reference library of £12,055 (2013:£17,424) held by IMLI, with additional reference texts being capitalized and depreciated over a period of three years. 83 This note includes the effect of the revaluation of the property, plant and equipment held by WMU and IMLI with a net impact of £3,799 (2013:£5,212) resulting from the change in value of the US dollar and Euro respectively from 1 January to 31 December 2014. Opening balances are presented at the exchange rate applicable on 1 January 2014 and closing balances at the rate applicable on 31 December 2014, while depreciation charges, additions and disposals for the year are shown at the average rate of exchange, consistent with Statement I and Statement II, respectively. 84 The City of Malmö provides leasing free of rent and maintenance for the WMU teaching and administration building. In kind contributions of services are not recognized in WMU's financial statements. The buildings used by IMLI are not included as the Institute has the bare use of the premises. The University of Malta and the Government of Malta have made the building available for use by the Institute for 15 years under the terms of an agreement dated 26 May 1988. The Government of Malta has since extended the period for a further 25 years and it reimburses the repair and maintenance costs up to approximately £7,236 (2013:£7,641). Note 2.7: Intangible Assets

Asset category - IMO


Externally purchased software

Total

Cost GBP

Opening Balance 01.01.2014 80,645 1,931,568 2,012,213

Additions 113,634 64,700 178,334

Transfers (42,841) 42,841 -

Closing Balance 31.12.2014 151,438 2,039,109 2,190,547

Accumulated Amortization

Opening Balance 01.01.2014 - (1,782,321) (1,782,321)

Amortization charge for the year

- (98,939) (98,939)

Closing Balance 31.12.2014 - (1,881,260) (1,881,260)

Net Book Value

Opening Balance 01.01.2014 80,645 149,247 229,892

Closing Balance 31.12.2014 151,438 157,849 309,287

85 Purchased intangible assets are capitalised if their cost is greater than or equal to the threshold of £500, with the exception of internally developed software where the threshold is £50,000 in view of the complexity in accurately assigning costs for development projects below this amount. The capitalized value of the internally developed software excludes those costs related to research and maintenance. 86 The costs recognized as assets under construction relate to development work on the implementation of additional SAP functionalities, Sharepoint and the development of the

Organization's Globallast and IMO Kid's websites. To the extent that the development work for these projects is undertaken by external resource, the identification and assignment of such costs can be readily identified from payment schedules and project milestones, with the completed asset under construction being transferred to Externally Purchased Software at the point of go-live.

Asset category - Consolidated


Externally purchased software

Total Group

Cost GBP

Opening Balance 01.01.2014 80,645 1,982,190 2,062,835

Additions 113,634 72,860 186,494

Transfers (42,841) 42,841 -

Movements as a result of exchange rate difference - 3,721 3,721

Closing Balance 31.12.2014 151,438 2,101,612 2,253,050

Accumulated Amortization

Opening Balance 01.01.2014 - (1,808,747) (1,808,747)

Amortization charge for the year - (111,639) (111,639)

Movements as a result of exchange rate difference - (2,384) (2,384)

Closing Balance 31.12.2014 - (1,922,770) (1,922,770)

Net Book Value

Opening Balance 01.01.2014 80,645 173,443 254,088

Closing Balance 31.12.2014 151,438 178,842 330,280

87 This note includes the effect of the revaluation of the Intangible Assets held by WMU with a net impact of £1,337 (2013: £163) resulting from the change in value of the US dollar from 1 January to 31 December 2014. Opening balances are presented at the exchange rate applicable on 1 January 2014 and closing balances at the rate applicable on 31 December 2014, while depreciation charges and additions for the year are shown at the average rate of exchange, consistent with Statement I and Statement II, respectively. 88 Neither IMO nor the consolidated group has made any disposals of externally purchased software during 2014.

Note 2.8: Payables and Accruals

IMO Consolidated

2014 2013 2014 2013

GBP GBP


Payable to vendors 1,226,155 420,302 1,215,504 539,585

Payable to staff 43,758 20,034 43,759 20,034

Accruals 1,639,759 1,591,980 1,708,805 1,674,445

Fellowships - - 223,971 217,404

Other - - 560 595

2,909,672 2,032,316 3,192,599 2,452,063


Fellowships - - 2,635,972 2,273,910

Contributions Incentive Scheme 1,415,584 1,518,099 1,415,584 1,518,099

Advance contributions 1,873,035 1,636,249 2,462,492 2,198,586

Condition on donor contributions 306,922 175,530 306,922 175,530

Payable to donors 77,735 103,886 189,361 301,267

Others - 230,639 339,564 449,739

3,673,276 3,664,403 7,349,895 6,917,131

Total Payables and Accruals 6,582,948 5,696,719 10,542,494 9,369,194

89 Payables to vendors relate to amounts due for goods and services for which invoices have been received. 90 Accruals represent estimates for the value of goods or services received, which have not yet been invoiced and for which the cost is not yet certain, most notably the provision of utilities and services delivered through the UNDP Service Clearing Account (SCA), and liabilities for goods and services received or provided to IMO during the period under agreed contracts but which have not yet been invoiced. 91 Under the Contributions Incentive Scheme (CIS) a part of the interest earned on the General Fund is returned to Member States, the allocation being based on a points system reflecting the timing and amount of the receipt of their current year assessments. At the 28th session of the Assembly in 2013, a timetable was agreed for distributing the accumulated balance in accordance with the instructions of individual Member States. During 2014, the Secretariat began the process of distributing the accumulated earnings for the years 2006 to 2013 in accordance with Assembly resolution A.1066(28). A total of £151,717 was distributed in 2014 of which £48,882 was applied against the annual assessment, £92,835 was voluntarily donated to IMO Funds; and £10,000 to the Philippines Typhoon Haiyan Relief Fund. Those remaining Members with earnings due after these distributions have been requested to provide their instructions for distribution by 31 March 2015. The distribution will be completed during 2015. 92 Advance contributions reflect balances received from Member States during 2014 towards the 2015 assessed contributions. 93 Payables to donors represent the balance of unspent contributions for projects pending refund. 94 The Organization recognizes as a liability conditions attached to certain voluntary contributions. Conditions may be imposed by donors on the use of contributions, and include

both a performance obligation to use the donation in a specified manner, and an enforceable return obligation to return the donation if it is not used in the specified manner. The amount recognized as a liability is the best estimate of the amount that would be required to settle the obligation at the reporting date. As IMO satisfies the conditions on voluntary contributions through performance in the specified manner, the carrying amount of the liability is reduced and an amount of revenue equal to that reduction is recognized. The value of the most significant condition balances is shown below.

IMO Consolidated

2014 2013 2014 2013

Condition on donor contributions GBP GBP

European Commission – Support FSI on PSC in Africa

241,214 - 241,214 -

NORAD 65,708 61,730 65,708 61,730

European Commission - GHG Study - 66,759

- 66,759

European Commission - Malacca and Singapore Straits Fund

- 23,446

- 23,446

ROPME-MEMAC - 23,595

- 23,595

Total 306,922 175,530 306,922 175,530

95 Fellowships and donations received and accrued for the academic year 2014/2015 relating to WMU and IMLI are apportioned over the period of the academic year. The amounts received or accrued in respect of that part of the academic year falling in 2015 are disclosed as advance receipts. Note 2.9: Provisions and Warranties

IMO Consolidated

2014 2013 2014 2013

GBP GBP

Publication sales warranties 69,100 69,765 69,100 69,765

Total provisions and warranties 69,100 69,765 69,100 69,765

Opening Balance 01.01.14 Utilization Increase

Closing Balance 31.12.14

GBP

IMO Publications 69,000 (73,587) 72,387 67,800

Model Courses 765 (3,969) 4,504 1,300

Total allowance 69,765 (77,556) 76,891 69,100

96 The Organization's sales of publications are primarily made through a network of distributors rather than directly to end users. The Organization has an established practice that, on publication of a new version of any title, distributors may return unsold copies of the previous version with the credit being set against purchases of the new title. A warranty

provision has been established to reflect possible future returns of sales made during the year, the level of provision being based on the level of sales in the year and past experience of return levels.

Note 2.10: Employee Benefits

IMO 2014 2013

Actuarial Valuation

IMO Estimates

Total Total

GBP GBP

Short-term employee benefits - 123,286 123,286 84,152

Post-employment benefits 33,248,775 - 33,248,775 31,698,634

Other long-term employee benefits 1,364,362 - 1,364,362 1,394,357

Termination benefits - 83,032 83,032 250,954

Total Employee Benefits Liabilities 34,613,137 206,318 34,819,455 33,428,097

Consolidated 2014

2013

Actuarial Valuation

Group Estimates

Total Total

GBP GBP

Short-term employee benefits - 153,550 153,550 95,508

Post-employment benefits 33,248,775 253,006 33,501,781 31,898,652

Other long-term employee benefits 1,364,362 162,977 1,527,339 1,599,628

Termination benefits - 83,032 83,032 250,954

Total Employee Benefits Liabilities 34,613,137 652,565 35,265,702 33,844,742

2014 2013

Short Term Employee Benefits

Post-Employment

Benefits

Other Long-Term

Employee Benefits

Termination Benefits

Total Total

GBP GBP

Composition:

Current 123,286 - - 83,032 206,318

217,683

Non-current - 33,248,775 1,364,362 - 34,613,137

33,210,414

Total Employee Benefits Liabilities 123,286 33,248,775 1,364,362 83,032 34,819,455

33,428,097

97 In determining its post-employment liabilities, WMU used an estimate of the travel and shipment costs based on the prevailing market prices from the duty station to the home country to which the staff member and eligible dependants, if any, are entitled to return. The amount of the liability for the unused annual leave as at the reporting date was calculated based on the balance of unused annual leave days (up to a maximum of 30 days) and the current salary rate of the staff member. The employee benefits for home leave represents the amounts accrued for the year with the cost spread over two years. 2.10.1: Valuation of Employee Benefits Liabilities 98 Employee benefits liabilities are determined by professional actuaries or calculated by IMO based on personnel data and past payment experience. At 31 December 2014, total employee benefits liabilities amounted to £34,819,454 (2013:£33,428,097), of which £34,613,137 (2013:£33,092,991) was calculated by the actuaries and £206,317 (2013:£335,106) was calculated by IMO. With effect from 2012 and in line with Assembly resolution A.991(25) long-term employee benefit liabilities previously allocated among donor funds on the basis of headcount have been allocated to the Organization's Termination Benefit Fund. Moreover, from 2014 the defined benefit liabilities relating to staff members under the Trading Fund have been transferred, along with matching assets, to the Termination Benefit Fund as established in Assembly resolution A.1063 (28). Actuarial valuations are undertaken every two years, the most recent being completed as at 31 December 2013. 2.10.2: Short-Term Employee Benefits 99 Short-term employee benefits comprise mainly wages and payroll related allowances, first time employee benefits, education grant related benefits and other benefits such as paid annual leave and sick leave. 100 Short-term employee benefits are expected to be settled within 12 months after the end of the period in which the employees render the related service and are measured at their nominal values based on past payment experience. 2.10.3: Post-Employment Benefits 101 Post-employment benefits are defined benefit plans consisting of United Nations Joint Staff Pension Fund (UNJSPF), After-Service Health Insurance Plan (ASHI) and repatriation grant and related benefits. 102 Arrangements relating to the UNJSPF are set out in Note 2.10.6.

2014 Consolidated 2013

Short Term Employee Benefits

Post-Employment

Benefits

Other Long-Term

Employee Benefits

Termination Benefits

Total Total

GBP GBP

Composition:

Current 153,550 - - 83,032 236,582 229,039

Non-current - 33,501,781 1,527,339 - 35,029,120 33,615,703

Total Employee Benefits Liabilities

153,550 33,501,781 1,527,339 83,032 35,265,702

33,844,742

103 ASHI is a plan that allows eligible retirees and their eligible family members to participate in the Cigna, formerly Van Breda Medical Scheme, for 50% of the cost of the contribution of active staff members for the defined type of coverage. The Organization subsidizes the remaining amount of the premium to be paid to the third party insurer. Membership of Cigna is compulsory for all new employees, although participation in the ASHI scheme after retirement is voluntary. Cigna is the main third party insurance provider for ASHI benefits; however, there are still a small number of retirees covered by the former insurer, BUPA. From 2 February 2015 Van Breda became Cigna, this is only a change in name and does not have an effect on the existing medical scheme for active employees or the ASHI coverage and the associated benefits. 104 Repatriation benefits consist of a repatriation grant lump sum, travel of the staff member and eligible dependants and shipment of their personal effects. The Organization pays the amounts due for repatriation grant, travel and relocation expenses for the entitled staff members. 105 The liabilities include the current service costs and the interest costs for 2014, less benefit payments made and, where applicable, plan participants' contributions. 2.10.4: Other Long-Term Employee Benefits 106 Other long-term employee benefits include accrued unused annual leave and, where applicable, compensation payments in the case of death, injury or illness attributable to performance of duties. 107 Although annual leave is a short-term employee benefit, the right to receive payment for unused annual leave and, consequently, the Organization's liability for this balance, is shown as a long-term employee benefit as that right only crystallizes on separation, typically more than twelve months from the reporting date.

2.10.5: Termination Employee Benefits 108 Termination benefits include the expected costs the Organization will bear for the termination of the contract of an employee as per the detailed formal plan in place at the reporting date. 109 In December 2013, the 18th Conference of the Parties to the Barcelona Convention (COP 18) met to consider, inter alia, actions necessary to address the financial difficulties of the Mediterranean Trust Fund (MTF) in recent years, and to ensure that a robust financial framework was in place to avoid such issues recurring. The REMPEC centre, based in Malta and administered by IMO, receives funding for its work under the Mediterranean Action Plan (MAP) through the MTF and consequently the long-term financial and operational model for REMPEC formed a part of the considerations at COP18. The meeting agreed that REMPEC should continue to be administered by IMO, but that some streamlining of the Centre was necessary to enhance its long-term financial sustainability. The decisions of the COP therefore included a budget for the MAP which contained funds set aside for implementing the streamlining of the Centre, and a revised staffing list for REMPEC to be implemented over the 2014-2015 biennium. 110 As a result of that decision, a formal plan was developed of four staff members, three to be undertaken by June 2014 and the other by January 2015, with termination indemnity payments to be made in accordance with IMO's established Staff Regulations and Staff Rules. The three staff members who separated in June 2014 received payments totalling £129,224. As at 31 December 2014 there was a realistic possibility of alternative arrangements being

made with respect to the fourth employee and, therefore, the remaining balance of the liability for £121,730 is no longer required under IPSAS 25. 111 There is, nevertheless, a liability for the benefits to be settled in 2015 for staff whose contracts terminated in 2014 and for a staff member separating from the Organization in 2015. 2.10.6: Actuarial Valuations of Post-Employment and Other Separation Related Benefits 112 Liabilities arising from post-employment benefits and other long-term employee benefits (i.e. accrued unused annual leave) are determined by consulting actuaries using the Projected Unit Credit Method. These employee benefits are established for those staff members who are entitled to such benefits under the IMO Staff Regulations and Staff Rules. Actuarial valuations are undertaken every two years, the most recent being completed as at 31 December 2013. 2.10.6.1: Actuarial Assumptions and Methods 113 During each actuarial study, IMO, in conjunction with the actuary, reviews and selects assumptions that will be used by the actuaries in the year-end valuation to determine the expense and contribution requirements for IMO's after-service benefit plans (post-employment benefits and unused accrued annual leave). For the 2013 valuation, the assumptions used are as described in the table below. 114 Actuarial assumptions are required to be disclosed in the financial statements in accordance with IPSAS 25. In addition, each actuarial assumption is required to be disclosed in absolute terms. 115 The following assumptions have been used to estimate the value of the post-employment and accrued unused annual leave employee liabilities for IMO as at 31 December 2014 based on the expenditure projections for the reporting period.

GENERAL

Baseline Discount Rate 4.90% p.a. as of 31 December 2014 4.90% p.a. as of 31 December 2013

General Inflation 3.60% p.a. as of 31 December 2014 3.60% p.a. as of 31 December 2013

Accounting Expected Return on Assets

Not applicable, no assets held

Mortality

Pre-retirement: Age related scale, indicative rates for age 55 - 0.26% for males and 0.11% for females Post-retirement: Age related scale, indicative rates at 31 December 2007 for age 65 => 0.61% male retirees and spouses and 0.46% female retirees and spouses Post-retirement mortality improvement: Assumed to apply over a 20 year period from 2007. For males the rates of improvement are 2% per annum for those under 70, reducing to nil for those over 95. For females the rates of improvement are 2% per annum for those under 60 reducing to nil for those over 90

Withdrawal Rates Vary according to age, gender and length of service, with different rates applying to professional and general service staff.

GENERAL (continued)

Retirement Rates

Vary according to age, gender and length of service, with different rates applying to professional and general service staff and staff joining before and after 1 January 1990

The tables for mortality, withdrawal rate and retirement rates above are based on those used for the valuation of the UN Joint Staff Pension Fund (UNJSPF) as at 31 December 2011

Assumptions used to value the ASHI Scheme

Participation after retirement 95% of eligible members are assumed to continue coverage after retirement. It is assumed that coverage will not be dropped once elected.

Spouses For current employees it is assumed that 60% will elect for coverage for their spouses at retirement. Males are assumed to be three years older than their spouse

Healthcare trend increases

31 December 2014: Declining from 8% p.a. in 2012 to 4.5% per annum from 2027 onwards 31 December 2013: Declining from 8% p.a. in 2012 to 4.5% per annum from 2027 onwards

Ageing increases 3.5% p.a. for those under 65, 2.5% p.a. for those between 65 and 70 reducing in five year age bands to nil for those over age 90

Assumptions used to value Repatriation Benefits

Participation All eligible employees will receive the benefit on separation from service

Aged related salary scale

31 December 2014

Reducing from 10.2% at age 20 to 5.1% at age 60 for professional staff and 8.0% at 20 to 5.1% at age 65 for general services staff

31 December 2013

Reducing from 10.2% at age 20 to 5.1% at age 60 for professional staff and 8.0% at 20 to 5.1% at age 65 for general services staff

Repatriation travel costs Assumed to be £6,000 and to increase in line with general inflation assumption

Assumptions used to value Annual Leave Plan

Participation All eligible employees will receive the benefit on separation from service

Salary increases As for repatriation benefit

Increases in annual leave balance Based on completed service – 15% for 1 year, 6.5%p.a. for 2-6 years and 0.1% p.a. thereafter.

116 The following tables provide additional information and analysis on employee benefits liabilities calculated by actuaries.

2.10.6.2: Reconciliation of Defined Benefit Obligation

IMO

After-Service Health

Insurance Plan

Repatriation Benefit Plan

Accrued Annual

Leave Plan Total

GBP

Defined Benefit Obligation as at 01.01.2014

28,868,716 2,829,918 1,394,357 33,092,991

Service cost for 2014 912,000 (43,519) 143,000 1,011,481

Interest cost for 2014 1,402,000 134,000 60,000 1,596,000

Actuarial Loss/(gain) - - - -

Actual gross benefit payments for 2014 (549,152) (305,188) (232,995) (1,087,335)

Defined Benefit Obligation as at 30,633,564 2,615,211 1,364,362 34,613,137

31.12.2014

2.10.6.3: Annual Expense for Calendar Year 2014

IMO


Insurance Plan


Accrued Annual

Leave Plan Total

GBP

Service cost 912,000 (43,519) 143,000 1,011,481

Interest cost 1,402,000 134,000 60,000 1,596,000

Actuarial Loss/(gain)

Total Expense recognized in 2014 2,314,000 90,481 203,000 2,607,481

117 None of the employee benefits liabilities associated with WMU and IMLI have been subject to actuarial estimate, and consequently the table above reflects both the IMO and consolidated positions. 2.10.6.4: Summary of Prior Year Amounts 118 The cumulative amount presented in the statement of changes in net assets/equity is that generated as a result of the actuarial valuation carried out in 2013.

IMO


Insurance Plan


Accrued Annual Leave

Plan Total

Actuarial Losses/(Gains) as at 01.01.2014 7,151,947 (718,706) 157,374 6,590,615

Actuarial Losses/(Gains) in 2014 - - - -

Actuarial Losses/(Gains) as at 31.12.2014 7,151,947 (718,706) 157,374 6,590,615

119 Actuarial gains and losses comprise experience adjustments for the difference between the previous actuarial assumptions and what actually happened; and the effects of changes in actuarial assumptions.

120 As no actuarial study was conducted at 31 December 2014, the assumptions underlying the liability remain unchanged and consequently there are no actuarial gains or losses for the year.

IMO 31.12.2014 31.12.2013 31.12.2012 31.12.2011 31.12.2010

ASHI GBP

Present Value of Defined Benefit Obligation 30,633,564 28,868,716 25,687,867 24,254,786 17,675,179

Experience (gain)/loss on Scheme Liabilities - (1,079,154) - 264,822 - Loss on changes in assumptions used to value Scheme liabilities

- 2,805,279 - 5,161,000 -

IMO 31.12.2014 31.12.2013 31.12.2012 31.12.2011 31.12.2010

Repatriation GBP


Experience loss/(gain) on Scheme Liabilities - 18,337 - (864,114) - (Gain)/loss on changes in assumptions used to value Scheme liabilities

- (20,929) - 148,000 -

IMO 31.12.2014 31.12.2013 31.12.2012 31.12.2011 31.12.2010

Annual Leave GBP


Experience loss/(gain) on Scheme Liabilities - 134,775 - (27,594) -

(Gain)/loss on changes in assumptions used to value Scheme liabilities

- (4,807) - 55,000 -

IMO 31.12.2014 31.12.2013 31.12.2012 31.12.2011 31.12.2010

Total GBP


Experience (gains) on Scheme Liabilities - (926,042) - (626,886) -

Loss on changes in assumptions used to value Scheme liabilities

- 2,779,543 - 5,364,000 -

2.10.6.5: Sensitivity Analysis 121 Two of the principal assumptions in the valuation of the long-term employee benefit plans are: i) the discount rate used to determine the present value of benefits that will be paid from the plan in the future; and ii) for the ASHI plan, the rate at which medical costs are expected to increase in the future. 122 The obligations were valued based on a discount rate of 4.9% as of 31 December 2014. The table below shows the effect of a one point percentage change in the discount rate as of 31 December 2014.

After Service Health

Insurance Plan


Accrued Annual Leave

Plan

%

%+1 (5,400,000) (200,000) (100,000)

%-1 7,400,000 200,000 100,000

123 Similarly, a sensitivity analysis was undertaken to determine the impact of changes in assumptions on future healthcare cost. The change in the ASHI obligation due to a one per cent change in the trend rate is presented below.

1% increase 1% decrease

2014 2014

Effect on the aggregate of the service cost and interest cost

670,000 (490,000)

Effect on defined benefit obligation 7,200,000 (5,400,000)

2.10.6.6: Expected Costs during 2014 124 The expected contribution of IMO in 2015 to the defined benefits plans is £1,104,000 (2014 estimate: £1,041,000). This has been derived from the 2014 paid figures with the ASHI payments unchanged for 2015 and the repatriation and annual leave payments increasing in line with inflation. 2.10.7: United Nations Joint Staff Pension Fund 125 The Pension Fund's Regulations state that the Pension Board shall have an actuarial valuation made of the Fund at least once every three years by the Consulting Actuary. The practice of the Pension Board has been to carry out an actuarial valuation every two years using the Open Group Aggregate Method. The primary purpose of the actuarial valuation is to determine whether the current and estimated future assets of the Pension Fund will be sufficient to meet its liabilities. 126 IMO's financial obligation to the UNJSPF consists of its mandated contribution, at the rate established by the United Nations General Assembly (currently at 7.9% for participants and 15.8% for member organizations) together with any share of any actuarial deficiency payments under Article 26 of the Regulations of the Pension Fund. Such deficiency payments are only payable if and when the United Nations General Assembly has invoked the provision of Article 26, following determination that there is a requirement for deficiency payments based on an assessment of the actuarial sufficiency of the Pension Fund as of the valuation date. Each member organization shall contribute to this deficiency an amount proportionate to the total contributions which each paid during the three years preceding the valuation date. 127 The actuarial valuation performed as of 31 December 2013 revealed an actuarial deficit of 0.72% (1.87% in the 2011 valuation) of pensionable remuneration, implying that the theoretical contribution rate required to achieve balance as of 31 December 2013 was 24.42% of pensionable remuneration, compared to the actual contribution rate of 23.7%. The next actuarial valuation will be conducted based on the position at 31 December 2015.

128 At 31 December 2013, the funded ratio of actuarial assets to actuarial liabilities, assuming no future pension adjustments, was 127.5% (130% in the 2011 valuation). The funded ratio was 91.2% (86.2% in the 2011 valuation) when the current system of pension adjustments was taken into account. 129 After assessing the actuarial sufficiency of the Fund, the Consulting Actuary concluded that there was no requirement, as of 31 December 2013, for deficiency payments under Article 26 of the Regulations of the Fund as the actuarial value of assets exceeded the actuarial value of all accrued liabilities under the Fund. In addition, the market value of assets also exceeded the actuarial value of all accrued liabilities as of the valuation date. At the time of this report, the General Assembly has not invoked the provision of Article 26. 130 In December 2012 and April 2013, the General Assembly authorized an increase to age 65 in the normal retirement age and in the mandatory age of separation respectively for new participants of the Fund, with effect not later than from 1 January 2014. The related change to the Pension Fund's Regulations was approved by the General Assembly in December 2013. The increase in the normal retirement age is reflected in the actuarial valuation of the Fund as of 31 December 2013. 131 During 2014, total contributions paid to UNJSPF amounted to £4,973,707 (2013: £5,228,582). The Organization's contributions on behalf of staff members amounted to £3,315,805 (2013: £3,485,602). Expected contributions due in 2015 are £3,435,000. 132 The United Nations Board of Auditors carries out an annual audit of the UNJSPF and reports to the UNJSPF Pension Board on the audit every year. The UNJSPF publishes quarterly reports on its investments and these can be viewed by visiting the UNJSPF at www.unjspf.org.

Note 2.11: Leases

2.11.1: Finance Leases 133 The Organization has finance leases in place for provision of general office and high-volume photocopiers for its Headquarters building. The present values of future payments due under this lease agreement are shown below.

IMO Consolidated

2014 2013 2014 2013

GBP GBP

Current 53,647 49,834 53,647 49,834

Non-current 35,182 88,829 35,182 88,829

Total Finance Lease Liabilities 88,829 138,663 88,829 138,663

134 The difference between the minimum lease payments due and the present value of such payments is analysed in the following table:

http://www.unjspf.org/

IMO Consolidated

Minimum payments

due

Finance charges

Present value of

minimum payments

Minimum payments

due

Finance charges

Present value of

minimum payments

GBP GBP

Less than one year 58,186 4,539 53,647 58,186 4,539 53,647

One to three years 36,090 908 35,182 36,090 908 35,182

Total Finance Lease liabilities

94,276 5,447 88,829 94,276 5,447 88,829

135 There are no sublease payments to be received on these leased assets. Ownership does not transfer to the Organization on conclusion of the lease, nor are there any options in place to purchase the equipment at that time. The lease agreement does not impose any restrictive covenants on the Organization. Neither WMU nor IMLI holds assets under finance leases. 2.11.2: Operating Leases 136 The Organization has a single operating lease with the United Kingdom government for the use of its Headquarters building. The minimum lease payments under this lease are set out in the table below:

IMO Consolidated

2014 2013 2014 2013

GBP GBP

Future minimum lease payments due under operating leases:

Not later than one year 1,195,751 1,195,751 1,195,751 1,195,751

Later than one year and not later than five years

5,978,757 5,978,757

5,978,757 5,978,757

Later than five years 14,349,017 15,544,768 14,349,017 15,544,768

Total future minimum lease payments - operating leases

21,523,525 22,719,276

21,523,525 22,719,276

137 The lease costs will be spread over the term of the lease on a straight-line basis, an amount of £1,195,751 having been recognized as annual expenditure in the period. 138 There are no non-cancellable sublease payments to be received on the Headquarters building. 139 The lease expires on 28 October 2032 and does not contain a break clause, nor does it contain renewal or purchase options. 140 The significant lease arrangements are highlighted below:

Alterations: The Organization is not entitled to make alterations or additions affecting the structure or the main services of the premises without written approval of the Landlord, the United Kingdom (UK) government;

Under-letting: When under-letting the building, the Organization must first offer to underlet to the landlord;

Letting out of conference facilities: When letting out conference facilities for commercial purposes, the Organization is required to "consider as a priority any request given with adequate prior notice by the Landlord"; and

Sharing of income and expenses: The lease agreement requires the sharing of all income from 'Net Rental' and all costs of "Major Repairs" on an 80:20 basis between the Government of the United Kingdom and the Organization.

Note 2.12: Fund Balances and Reserves

Organization Only

Opening Balance

Operating Surplus for the Period

Other Movements in Reserves

Closing Balance

01.01.2014 31.12.2014

GBP

General Fund 10,555,967 2,381,020 - 12,936,987

Working Capital Fund 1,507,472 449,772 - 1,957,244

Trading Fund 8,140,150 180,740 - 8,320,890

Termination Benefit Fund (28,204,221) (1,553,846) - (29,758,067)

HQ Capital Fund 2,979,842 (96,708) - 2,883,134

Training and Development Fund 243,994 (15,928) - 228,066

Technical Cooperation Fund 5,042,459 1,450,646 - 6,493,105

Bilateral Operations and Multi-Donor Trust Funds6:

Djibouti Code of Conduct Trust Fund 4,269,995 (2,166,946) - 2,103,049

IMO West and Central Africa Maritime Security Trust Fund

163,810 1,127,431 - 1,291,241

Norwegian Agency for Development Corporation (NORAD)

1,274,029 (174,154) - 1,099,875

GESAMP Trust Fund 835,059 178,651 - 1,013,710

International Maritime Security Trust (IMST) Fund 899,320 74,688 - 974,008

Model Courses Development Trust Fund 780,595 131,755 - 912,350

United Kingdom 473,892 184,097 - 657,989

Republic of Korea 510,527 114,915 - 625,442

Associate Professional Officers (APO) 762,862 (168,373) - 594,489

Other Bilateral Operations and Multi-Donor Trust Funds7 2,749,140 694,366 - 3,443,506

Total 12,984,892 2,792,126 - 15,777,018

Consolidated

Opening Balance

Operating Surplus for the Period

Other Movements in Reserves

Closing Balance

01.01.2014 31.12.2014

GBP

Total 18,546,609 3,681,492 (829,247) 21,398,854

141 The Organization maintains separate accounts for each Fund, which are combined into eight groups for reporting purposes as set out above. 142 The General Fund was established for the purpose of accounting for the expenditure of the Organization.

6 All funds and bilateral agreements with a closing balances in excess of £500,000 are disclosed separately,

with other funds being aggregated under 'Other Bilateral Operations and Multi-Donor Trust Funds'. 7 Governments of Australia, Canada, China, Denmark, Egypt, Finland, France, Germany, Italy, Japan,

Malaysia, Netherlands, Nigeria, Norway, Oman, Saudi Arabia, Spain, Sweden, United States of America, European Commission, Indian Ocean Commission, International Association of Ports and Harbors (IAPH), International Transport Workers Federation, Union of Greek Shipowners, United Nations Development Programme (UNDP), United Nations Environment Programme (UNEP), United Nations Office for Project Services (UNOPS), BallastWater TV Documentary, Goal-Based Standards (GBS) Trust Fund, IMO London Convention/Protocol TC Trust Fund, IMO Malacca and Singapore Straits Trust Fund, IMO Member States Audit Scheme Trust Fund, IMO/REMPEC Trust Fund, IMO-GloBallast Global Industry Alliance (GIA) Fund, Implementation of the revised STCW Convention and Code, International Search and Rescue (SAR) Trust Fund, International Ship Recycling Trust Fund, Marine Pollution Response Trust Fund, Research and Development Trust Fund, Seminars and Workshops Fund, Study on Greenhouse Gas Emissions, Tsunami Relief Fund.

143 The Working Capital Fund was originally established as a US dollar based Fund by Assembly resolution A.19(I) and was converted to sterling with effect from 1 January 1988 by Assembly resolution A.633(15)B. The purpose of the Fund is to make advances, if necessary, to finance the budgetary appropriations of the Regular Budget to cover temporary cash flow deficits. Assembly resolution A.1039 (27) further authorized the Secretary-General to use the fund as a reserve to account for currency gains or losses in the regular budget arising from differences between the United Nations operational rate of exchange and the rate against the pound sterling adopted for calculation of the appropriation. It also authorises the Secretary-General to advance such sums from the Working Capital Fund as may be necessary to meet unforeseen or extraordinary expenses arising during the biennium, with the prior agreement of the Council, provided that such expenses are of a clearly exceptional nature and relate specifically to the Strategic and High-level Action plans of the Organization and that the Council is assured that the relevant expenditure cannot be met by appropriate transfer action within the total budget approved for a calendar year. 144 The Printing Fund was established with effect from 1 January 1966 by Assembly resolution A.100(IV) to provide for the production and sales of IMO publications, being subsequently replaced by the Trading Fund through Assembly resolution A.1014(26), broadening its terms of reference to encompass the Organization's current commercial activities. 145 The Termination Benefit Fund was established with effect from 1 January 1996 by Assembly resolution A.837(19) at an initial level of £900,000 to meet the costs associated with termination benefits to staff of the Organization. The scope of the Fund was widened to allow the financing of the additional costs of temporary assistance required to replace staff on long-term sick leave. From 2012 it was further widened to accommodate long-term employee benefit liabilities previously allocated among all Funds on the basis of headcount, as described in paragraph 98. 146 The Technical Cooperation Fund was originally established with effect from 1 January 1986 by Assembly resolution A.593(14) as a US dollar based fund, the interest income from which was used to assist the Technical Cooperation Programme of the Organization in accordance with the proposal supported by the Assembly in biennial budgets. The Fund was converted to a sterling based fund with effect from 1 January 1996 by Assembly resolution A.837(19). By that resolution, the scope of the Fund was widened to enable funds to be drawn down and applied to technical cooperation activities. 147 The Headquarters Capital Fund was established with effect from 1 January 1994 by Assembly resolution A.778(18) to meet the capital expenditure necessary for the efficient operation of the Organization and for fulfilling the Organization's liabilities under the terms of the Lease for the Headquarters building between the Organization and the Government of the United Kingdom. The scope of the Headquarters Capital Fund was widened to include expenditure on the design, installation and implementation of office automation systems, including training on these systems. 148 The Training and Development Fund was established with effect from 1 January 2002 by Assembly resolution A.906(22) at an initial level of £200,000 by a transfer from the surplus of the then Printing Fund as at 1 January 2002 for organizational strengthening initiatives. 149 Trust Funds are established to account for the expenditures related to the activities financed from the respective donors. Fund balances represent the unexpended portion of contributions that are intended to be utilized in future operational requirements consistent with the Terms of Reference of the Fund. These constitute IMO's residual interest in the assets after deducting all its liabilities.

NOTE 3: REVENUE

Note 3.1: Assessed Contributions

150 The Organization's ten largest contributors to assessed contributions in 2014 are shown below. Assessed contributions are based on a flat base rate with additional components based on ability to pay and merchant fleet tonnage. WMU and IMLI do not receive assessed contributions.

Amount

GBP

% of total assessment

1 Panama 5,446,013 18.1%

2 Liberia 3,137,437 10.4%

3 Marshall Islands 2,158,871 7.2%

4 Singapore 1,619,536 5.4%

5 United Kingdom 1,375,094 4.6%

6 Bahamas 1,321,276 4.4%

7 China 1,190,820 4.0%

8 Malta 1,146,725 3.8%

9 Greece 1,037,957 3.5%

10 Japan 993,208 3.3%

Total 19,426,937 64.7%

Note 3.2: Donor Contributions

151 Contributions through donor agreements are recognized as revenue at the point of signature, except to the extent that such agreement contains a condition within the meaning of IPSAS 23 – "Revenue from Non-Exchange Transactions" such that the contributions must be returned if the condition is not met. For agreements which do contain such a condition, revenue is recognized as the project is delivered. 152 The Organization's ten largest contributors to donor revenue in 2014 are shown below:

IMO Amount

% of total

donor revenue GBP

1 United Nations Environment Programme (UNEP) 782,305 16.5

2 Government of Japan 684,261 14.4

3 Government of the United Kingdom 558,968 11.8

4 Government of Republic of Korea 525,524 11.1

5 Government of Canada 426,073 9.0

6 United Nations Development Programme (UNDP) 318,717 6.7

7 Government of the United States of America 217,081 4.6

8 Government of Germany 216,711 4.6

9 Government of Norway 175,815 3.7

10 European Commission 172,974 3.6

Total 4,078,429 85.8

153 The consolidated group's ten largest contributors to donor revenue in 2014 are shown below:

Consolidated Amount

GBP

% of total donor

revenue

1 Government of Sweden 2,310,636 27.7

2 United Nations Environment Programme (UNEP) 782,305 9.4

3 Government of Japan 684,261 8.2

4 Government of the United Kingdom 558,968 6.7

5 Nippon Foundation 532,765 6.4

6 Government of Republic of Korea 525,524 6.3

7 Government of Canada 426,073 5.1

8 United Nations Development Programme (UNDP) 318,717 3.8

9 Government of the United States of America 217,081 2.6

10 Government of Germany 216,711 2.6

Total 6,573,041 78.8

Note 3.3: Commercial Activities

154 Key commercial revenue streams for the Organization and the consolidated group are shown below:

IMO Consolidated

2014 2013 2014 2013

GBP

GBP GBP

Publication Sales 11,235,700 11,075,902 11,234,377 11,074,302

Cafeteria Sales 558,964 755,365 612,864 797,321

Assessment fees8 837,150 339,865 837,150 339,865

Letting of conference facilities and other commercial revenue

6,427 20,185 1,436,143 1,567,027

Total 12,638,241 12,191,317 14,120,534 13,785,515

8 For 2014, assessment fees have been accounted for and categorised as revenue from exchange

transactions rather than as donor revenue. This change in disclosure is reported further under Note 11.

155 The major components of IMO Publication Sales are shown below:

IMO 2014 2013

GBP GBP

Sale of physical publications 10,313,366 10,286,488

Electronic publications 337,239 284,732

Royalties 272,236 201,747

Subscriptions 146,507 167,088

Model Courses 136,442 106,315

Other publications 29,910 29,532

Total 11,235,700 11,075,902

Note 3.4: Fellowships

156 Both WMU and IMLI receive funds for fellowships to support students. IMO does not receive such revenue, and consequently the consolidated figures only are shown. The five largest aggregate contributors are listed below:

Consolidated

2014 % of total fellowship revenue GBP

1 Ship and Ocean Foundation 713,312 17.0

2 South African Shipping and Maritime Authority 635,399 15.1

3 Indonesian Port Corporation 305,794 7.3

4 Nippon Foundation 277,380 6.6

5 Deutsche Gesellschaft für Internationale Zusammenarbeit

139,794 3.3

Total 2,071,679 49.3

Note 3.5: Other Revenue 157 The most significant sources of other revenue are set out below:

IMO Consolidated

2014 2013

2014 2013

GBP GBP GBP GBP

Interest earned on investment of funds 239,073 184,328 284,403 233,429

Sub-letting of office space 34,383 33,758 37,101 34,854

Other revenue 24,033 182,717

427,294 413,480

Total 297,489 400,803 748,798 681,763

NOTE 4: EXPENDITURE

IMO Consolidated

2014 2013 2014 2013

GBP GBP GBP GBP

4.1 Staff and other personnel costs Professional and General Service staff,

experts 25,582,350 25,954,428 30,364,950 30,865,916

Recruitment and repatriation 2,420,826 2,092,798 2,540,483 2,154,404

Termination benefit (38,698) 322,087 (38,698) 322,087

Consultants 1,124,163 968,682 1,472,808 1,298,190

Temporary assistance 904,809 953,918 1,047,982 997,358 Meetings personnel (Interpreters,

translators, temporary employees) 854,718 840,260 854,718 840,260

Total staff and other personnel costs 30,848,168 31,132,173 36,242,243 36,478,215

4.2 Travel

Fares 1,040,242 1,170,713 1,287,857 1,440,945 Daily Subsistence Allowance (DSA) and

other expenses 816,699 878,575 979,038 1,092,435

Total travel 1,856,941 2,049,288 2,266,895 2,533,380

4.3 Supplies, consumables and other running costs

Office supplies and consumables 102,792 104,238 133,873 146,712

Telecommunications and information technology 1,059,067 977,585 1,115,971 1,045,848

Rent, rates and insurance 1,423,374 1,402,824 1,500,377 1,474,646

Utilities 525,570 537,321 564,339 596,294

Medical costs 22,862 22,247 22,862 22,247

Library books, magazines, subscriptions 18,255 37,555 169,582 180,957

Hospitality 33,639 18,962 141,585 182,136

Vehicle, local transport and hotel accommodation 44,716 43,440 55,707 57,262

Postage, telephone and freight 412,070 411,440 484,338 516,731

Equipment, furniture and local procurement 646,144 1,923,573 674,760 1,976,464

Building maintenance 1,103,968 722,444 1,110,706 742,364

Other operational costs - - 416,331 180,777

Total supplies, consumables and other running costs 5,392,457 6,201,629 6,390,431 7,122,438

4.4 Costs related to trading activities

Cost of Sales IMO Publications 943,224 997,272 943,224 997,272

Cost of Sales Model courses 21,673 17,796 21,673 17,796

Loss/(Gain) on Physical Inventory (3,329) 1,167 (3,329) 1,167

Publications issued free of charge 42,658 33,295 42,658 33,295

Provision for return of obsolete publications 76,891 58,018 76,891 58,018

Printing (contract - out) 140,784 190,666 140,784 190,666

Electronic publishing (IMO/Vega) 116,300 96,927 116,300 96,927

Catering food and supplies 382,005 440,989 448,062 504,177

Public relations articles held by WMU - - 5,374 3,907

Total costs related to trading activities 1,720,206 1,836,130 1,791,637 1,903,225

1

2 IMO Consolidated

2014 2013 2014 2013

GBP GBP GBP GBP

4.5 Outsourced services

Security services 433,396 396,713 467,420 414,084

Cleaning services 397,898 381,151 545,671 528,744

Telecommunications/IT related services - - 37,226 72,182

Leases 24,972 24,547 24,972 24,547 Sub-contract delivery of Technical

Cooperation activities 212,692 275,124 212,691 259,872

Total outsourced services 1,068,958 1,077,535 1,287,980 1,299,429

4.6 Training and development

Staff training 92,002 63,798 98,760 72,832

Fellowships 598,569 682,430 2,218,553 2,158,907

Group training including participant travel 2,304,930 2,429,320 2,304,930 2,381,410

Student costs (WMU and IMLI) - - 92,030 83,182

Total training and development 2,995,501 3,175,548 4,714,273 4,696,331

4.7 Currency exchange (gains)/losses (883,230) 598,453 (871,721) 829,735

4.8 Depreciation, amortization and impairment

Depreciation of property, plant and equipment 449,970 350,224 581,049 488,400

Donation of completed Assets Under Construction 467,449 66,572 467,449 66,572

(Gains) on disposal of property, plant and equipment (1,219) (6,556) (1,219) (5,742)

Amortization of intangible assets 98,939 124,345 111,638 132,083

Impairment of IMO publications 17,987 91,176 17,987 91,176

Total depreciation, amortization and impairment 1,033,126 625,761 1,176,904 772,489

4.9 Return of unspent funds 48,644 - 48,644 -

4.10 Other expenses

Jointly financed UN bodies 91,992 93,654 91,992 93,655

Grants 248,367 248,082 - -

IMO News and publicity 55 19,898 40,628 51,843 Bank charges/investment manager and

custodian fees 175,433 144,986 191,534 162,356

External audit 55,600 38,348 92,726 111,453

Other miscellaneous expenses 360,484 365,249 404,653 458,820

Total other expenses 931,932 910,217 821,533 878,127

Total expenses 45,012,703 47,606,734 53,868,819 56,513,369

158 Staff and other personnel costs include salaries, wages, fees, employee benefits and other costs associated with staff, project experts and support personnel, consultants, temporary assistance and meeting personnel (interpreters, translators and temporary employees) of all headquarters and field staff employed by IMO.

159 Travel includes the cost of the fares, DSA and other associated expenses of the mission of staff members, project experts and consultants. The costs of home leave travel, recruitment travel and repatriation travel are reported under 4.1 – Staff and other personnel costs and the students' travel and field trips costs are accounted for under 4.6 – Training and development. 160 Supplies, consumables and other running costs primarily include the cost of running the headquarters and field office buildings, including rent paid under the building lease with the Government of the United Kingdom of £1,195,751 (2013:£1,195,751). 161 Costs related to trading activities include the cost of all commercial sales within the meaning of IPSAS 9 – "Revenue from Exchange Transactions", but excludes staff costs and common overhead costs. 162 Outsourced services include the costs of the most significant outsourcing arrangements in place, namely those for the provision of security, cleaning and building management services. Sub-contracts under the technical cooperation and extra-budgetary activities are also reported under this expense category. 163 Training and development includes the cost of staff training incurred under the regular budget and the Training and Development Fund, and the fellowship and group training costs incurred under the Technical Cooperation Fund and various donor trust Funds. 164 Other expenses include shared costs of jointly financed UN bodies, public information (including IMO News and publicity), bank charges and external audit fees. NOTE 5: STATEMENT OF COMPARISON OF BUDGET AND ACTUAL AMOUNTS

165 Explanations of material differences between the original budget and the final budget as well as between the final budget and the actual amount are presented under the Financial and Budget Performance Highlights section of the Secretary-General's Statement. 166 The Organization's budget and accounts are prepared on different bases. The Statement of Financial Performance (Statement II) is prepared on a full accrual basis using a classification based on the nature of expenses, whereas the Statement of Comparison of Budget and Actual Amounts (Statement V) is prepared on a modified accrual basis. In this respect, it is required under IPSAS 24 that actual amounts presented on Statement V should be reconciled to the actual amounts presented in the financial statements, identifying differences in terms of basis, timing and entity, respectively. Basis differences occur when the approved budget is prepared on a basis other than the accounting basis. For IMO, the budget is prepared on the commitment basis but the financial statements are prepared on the accrual basis. Timing differences occur when the budget period differs from the reporting period reflected in the financial statements. There is no timing difference for IMO for the purpose of comparison. Entity differences occur when the budget omits programmes or entities that are part of the entity for which the financial statements are prepared. 167 There are also differences in formats and classification schemes adopted for presentation of financial statements and the budget. The budget for extra-ordinary activities of IMO funded by the various donor/trust Funds is not included in Statement V and thus the amounts associated with the revenues and expenses of those Funds are classified as presentation differences. The comparison is also made for not only the budgets approved by the IMO Assembly but also for those approved by the respective governing bodies of WMU and IMLI.

168 Reconciliation between the actual amount on a comparable basis in the Statement of Comparison of Budget and Actual Amounts (Statement V) and the actual amount in the Statement of Cash Flow (Statement IV) for the year ended 31 December 2013 is presented in the ensuing paragraphs. 169 Budget amounts have been presented on a functional classification basis in accordance with the approved budget for 2014 which present a breakdown of the budget for purposes of the above comparison. The amount of net receipts over payments of £3,493,116 for 2014 shown in Statement Va (IMO only) has been reconciled to the net increase in cash and cash equivalents of £5,391,989 presented in Statement IV (IMO 2014) and the details on the reconciliation is presented in the table below.

Adjustments Pertaining to the Cash Flows from:

Operating

Activities Financing Activities

Investing Activities

Total

GBP IMO

Actual Amounts on Comparable Basis (Statement Va)

A 3,493,116 - 3,493,116

Basis differences a 3,183,564 (130,493) 3,053,071

Presentation differences b (1,154,198) - - (1,154,198)

Entity difference c -

- -

Total Differences B=a+b+c 2,029,366 - (130,493) 1,898,873

Actual Amounts in the Statement of Cash Flow (Statement IV)

C=A+B 5,522,482 - (130,493) 5,391,989

170 The reconciliation of the amount of net receipts over payments of £4,247,089 shown in Statement Vb (Consolidated 2014 including WMU and IMLI) has also been made to the net increase in cash and cash equivalents of £5,553,122 indicated in Statement IV (Consolidated 2014), as shown in the table below, taking into account the reconciliation statements submitted by WMU and IMLI.

Adjustments Pertaining to the Cash Flows from:

Operating

Activities Financing Activities

Investing Activities

Total

GBP

Consolidated

Actual Amounts on Comparable Basis (Statement Vb)

A 4,227,193 19,896 4,247,089

Basis differences a 2,973,842 (653,183) (186,238) 2,134,421

Presentation differences b (764,347) (64,041) - (828,388) ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

25,482)

Entity difference c - - -- -

Total Differences B=a+b+c 2,209,495 (717,224) (186,238) 1,306,033

143 Actual Amounts in the Statement of Cash Flow (Statement IV)

C=A+B 6,436,688 (717,224) (166,342) 5,553,122

NOTE 6: SEGMENT REPORTING Note 6.1: Segmental Statements of Financial Position Note 6.1.1: Statement of Financial Position by Segment – IMO

Core

Programme Management

Trading and Business Activities

Technical Cooperation

Activities and Trust

Fund

Elimination Grand Total

GBP

ASSETS

Current assets

Cash and cash equivalents 27,472,178 7,069,334 18,188,790 - 52,730,302

Contributions receivable 328,803 - 468,480 - 797,283

Inventories - 879,562 - - 879,562

Advances to sub-contractors 6,440 - 109,352 - 115,792

Inter-segment sums receivable 6,088,768 4,486,783 4,396,194 (14,971,745) -

Other receivables

Relating to exchange transactions 1,574,539 150,708 93,606 - 1,818,853

Relating to non-exchange transactions - - - - -

Total current assets 35,470,728 12,586,387 23,256,422 (14,971,745) 56,341,792

Non-current assets

Property, plant and equipment 586,050 28,968 71,253 - 686,271

Intangible assets 262,490 - 46,797 - 309,287

Total non-current assets 848,540 28,968 118,050 - 995,558

TOTAL ASSETS 36,319,268 12,615,355 23,374,472 (14,971,745) 57,337,350

LIABILITIES

Current liabilities

Payables and accruals

Relating to exchange transactions (1,175,331) (811,224) (923,117) - (2,909,672)

Relating to non-exchange transactions (3,288,618) - (384,658) - (3,673,276)

Provisions and warranties - (69,100) - - (69,100)

Inter-segment sums payable (8,724,093) (3,414,141) (2,833,511) 14,971,745 -

Employee benefits (181,895) - (24,422) - (206,317)

Finance lease liabilities (53,647) - - - (53,647)

Total current liabilities (13,423,584) (4,294,465) (4,165,708) 14,971,745 (6,912,012)


Employee benefits (34,613,138) - - - (34,613,138)

Finance lease liabilities (35,182) - - - (35,182)

Total non-current liabilities (34,648,320) - - - (34,648,320)

TOTAL LIABILITIES (48,071,904) (4,294,465) (4,165,708) 14,971,745 (41,560,332)

NET ASSETS (11,752,636) 8,320,890 19,208,764 - 15,777,018

Fund balances and reserves (12,916,946) 8,140,150 17,761,688 - 12,984,892

Surplus for the year 1,164,310 180,740 1,447,076 - 2,792,126

TOTAL FUND BALANCES AND RESERVES

(11,752,636) 8,320,890 19,208,764 - 15,777,018

Note 6.1.2: Statement of Financial Position by Segment – Consolidated

Core





Fund

Education and

Research Elimination Grand Total

GBP

ASSETS

Current assets

Cash and cash equivalents 27,472,178 7,069,334 18,188,790 8,884,883 3,736 61,618,921

Contributions receivable 328,803 - 468,480 2,467 - 799,750

Inventories - 879,563 - 24,491 - 904,054

Advances to sub-contractors 6,440 - 109,352 - - 115,792

Inter-segment sums receivable 6,088,768 4,486,783 4,396,194 1,722,540 (16,694,285) -

Other receivables


1,574,539 150,707 93,606 923,784 (7,013) 2,735,623


- - - 54,505 - 54,505

Total current assets 35,470,728 12,586,387 23,256,422 11,612,670 (16,697,562) 66,228,645

Non-current assets

Property, plant and equipment 586,050 28,968 71,253 119,783 - 806,054

Intangible assets 262,490 - 46,797 20,993 - 330,280

Total non-current assets 848,540 28,968 118,050 140,776 - 1,136,334

TOTAL ASSETS 36,319,268 12,615,355 23,374,472 11,753,446 (16,697,562) 67,364,979

LIABILITIES

Current liabilities

Payables and accruals


(1,175,332) (811,224) (923,117) (381,763) 98,837 (3,192,599)


(3,288,617) - (384,658) (3,650,944) (25,676) (7,349,895)

Provisions and warranties - (69,100) - - - (69,100)

Inter-segment sums payable (8,724,093) (3,414,141) (2,833,511) (1,722,540) 16,694,285 -

Employee benefits (181,895) - (24,422) (30,265) - (236,582)

Finance lease liabilities (53,647) - - - - (53,647)

Total current liabilities (13,423,584) (4,294,465) (4,165,708) (5,785,512) 16,767,446 (10,901,823)


Employee benefits (34,613,138) - - (415,982) - (35,029,120)

Finance lease liabilities (35,182) - - - - (35,182)

Total non-current liabilities (34,648,320) - - (415,982) - (35,064,302)

TOTAL LIABILITIES (48,071,904) (4,294,465) (4,165,708) (6,201,494) 16,767,446 (45,966,125)

NET ASSETS (11,752,636) 8,320,890 19,208,764 5,551,952 69,884 21,398,854

Fund balances and reserves (12,916,946) 8,140,150 17,761,687 4,872,025 (139,554) 17,717,362

Surplus for the year 1,164,310 180,740 1,447,077 679,927 209,438 3,681,492

TOTAL FUND BALANCES AND RESERVES

(11,752,636) 8,320,890 19,208,764 5,551,952 69,884 21,398,854

Note 6.2: Segmental Statements of Financial Performance

Note 6.2.1: Statement of Financial Performance by Segment – IMO

Core





Fund

Elimination Grand Total

GBP

Revenue

Assessed contributions 30,116,000 - - - 30,116,000

Donor contributions - - 4,763,769 (10,670) 4,753,099

Commercial activities 6,427 11,685,890 945,924 - 12,638,241

Other revenue 195,377 36,941 62,146 3,025 297,489

Support costs earned 1,302,367 - - (1,302,367) -

Inter-segment transfers 2,114,744 (6,234,161) 4,887,417 (768,000) -

TOTAL REVENUE 33,734,915 5,488,670 10,659,256 (2,078,012) 47,804,829

Expenditure

Staff and other personnel costs (25,895,767) (1,877,020) (3,086,051) 10,670 (30,848,168)

Travel (323,741) (79,638) (1,453,562) - (1,856,941)

Supplies, consumables and other running costs

(4,046,350) (740,646) (605,461) - (5,392,457)

Costs related to trading activities (7) (1,720,199) - - (1,720,206)

Outsourced services (746,288) (109,978) (212,692) - (1,068,958)

Training and development (92,002) - (2,903,499) - (2,995,501)

Currency exchange gains 72,849 18,402 791,979 - 883,230

Support costs charged - (634,986) (664,356) 1,299,342 -

Depreciation, amortization and impairment (497,552) (21,539) (514,034) - (1,033,125)

Return of unspent funds - - (48,645) - (48,645)

Other expenses (273,747) (142,326) (515,859) - (931,932)

Inter-segment transfers (768,000) - - 768,000 -

TOTAL EXPENDITURE (32,570,605) (5,307,930) (9,212,180) 2,078,012 (45,012,703)

SURPLUS FOR THE YEAR 1,164,310 180,740 1,447,076 - 2,792,126

Note 6.2.2: Statement of Financial Performance by Segment – Consolidated

Core





Fund

Education and

Research Elimination Grand Total

GBP

Revenue

Assessed contributions 30,116,000 - - - - 30,116,000

Donor contributions - - 4,763,769 3,604,945 (10,670) 8,358,044

Commercial activities 6,427 11,685,890 945,924 1,483,616 (1,323) 14,120,534

Fellowships - - - 4,613,025 (406,090) 4,206,935

Other revenue 195,377 36,941 62,146 458,559 (4,225) 748,798

Support costs earned 1,302,367 - - - (1,302,367) -

Inter-segment transfers 2,114,744 (6,234,161) 4,887,417 - (768,000) -

TOTAL REVENUE 33,734,915 5,488,670 10,659,256 10,160,145 (2,492,675) 57,550,311

Expenditure

Staff and other personnel costs (25,895,767) (1,877,020) (3,086,051) (5,387,588) 4,183 (36,242,243)

Travel (323,741) (79,638) (1,453,562) (414,079) 4,125 (2,266,895)

Supplies, consumables and other running costs

(4,046,350) (740,646) (605,461) (1,008,932) 10,958 (6,390,431)

Costs related to trading activities (7) (1,720,199) - (71,431) - (1,791,637)

Outsourced services (746,288) (109,978) (212,692) (219,022) - (1,287,980)

Training and development (92,002) - (2,903,499) (2,085,932) 367,160 (4,714,273)

Currency exchange gains/(losses) 72,849 18,402 791,979 (11,487) (22) 871,721

Support costs charged - (634,986) (664,356) - 1,299,342 -

Depreciation and amortization (497,552) (21,539) (514,034) (143,779) - (1,176,904)

Return of unspent funds - - (48,644) - - (48,644)

Other expenses (273,747) (142,326) (515,859) (137,968) 248,367 (821,533)

Inter-segment transfers (768,000) - - - 768,000 -

TOTAL EXPENDITURE (32,570,605) (5,307,930) (9,212,179) (9,480,218) 2,702,113 (53,868,819)

SURPLUS FOR THE YEAR 1,164,310 180,740 1,447,077 679,927 209,438 3,681,492

171 Some internal activities result in accounting transactions which create inter-segment revenue and expense balances in the financial statements. Inter-segment transactions are reflected in the above statements to accurately present these financial statements, the most significant examples of which are the Council-mandated transfers from the Trading Fund to other organizational funds. The aggregate amount was £6,209,172, of which £4,967,337 was to the Technical Co-operation Fund, comprising £4,718,970 for the TC Fund itself and a further £248,367 for onward transfer to WMU, and £1,241,835 was to the Core Programme. In addition, there are support costs totalling £664,356 charged on extra-budgetary activities and £634,985 charged to the Trading Activities to reimburse costs incurred by the Core Programme. 172 In the consolidated notes, revenue totalling £231,083 (2013:£526,822) and expenditure totalling £458,839 (2013:£570,175) between IMO and WMU, and revenue totalling £183,580 (2013:£191,967) and expenditure totalling £165,262 (2013:£203,643) between IMO and IMLI, have been included in the segment reporting figures and eliminated in arriving at the consolidated position, the elimination producing a net effect of increasing the surplus by £209,438 (2013: decreasing the surplus £55,029). Further information on the nature of these transactions is provided in note 9.2.

173 A brief summary of the goods and services provided under each segment, and their objectives, is set out in Note 1, paragraphs 40 to 45.

NOTE 7: COMMITMENTS AND CONTINGENCIES Note 7.1: Commitments 174 As at 31 December 2014, IMO had commitments for goods and services including consultancy contracted but not delivered as follows:

IMO

2014

2013

GBP GBP

Purchase of services including consultancy 1,745,753 1,533,094

175 The actual discharge of the 2013 commitments in 2014 is £1,208,020, the breakdown of which is shown below:

2013 Commitments 2014 discharge

Regular budget strategic results 33,419 28,110

Trading activities 238 238

Headquarters capital 387,796 255,359

Training and development - -

Termination benefit 15,500 15,500

Technical cooperation (TC Fund) 231,094 201,904

Sub-total 668,047 501,111

Technical cooperation (Donor Funds) 865,047 706,909

Total 1,533,094 1,208,020

176 Neither WMU nor IMLI has commitments or contingencies at the year end and consequently the figures shown above reflect the consolidated position as well. Note 7.2: Legal or Contingent Liabilities

177 There are no contingent liabilities arising from legal actions and claims that are likely to result in a significant liability to IMO and to the consolidated group.

178 The Organization, in conjunction with UNDP, conducted a review of all historical balances under the UNDP Service Clearing Account (SCA), and its predecessor the Interoffice Voucher (IOV) scheme, under which UNDP provides services to other UN system organizations, and the Project Clearing Account (PCA), through which UNDP acts as a donor for IMO extra-budgetary activities. While the Organization's financial statements reflect amendments arising as a result of that review, there remains a net difference on the SCA and PCA accounts of $110,429 and $136,122, respectively, between IMO and UNDP. IMO and UNDP are actively seeking to conclude the matter, and we do not presently believe that further adjustments will be required on IMO's side as a result of these differences.

NOTE 8: LOSSES, EX-GRATIA PAYMENTS AND WRITE-OFFS

179 Financial Regulation 12.3 provides that "The Secretary-General may make such ex-gratia payments as he deems to be necessary in the interest of the Organization, provided that a statement of such payments shall be submitted to the Assembly with the financial statements". During 2014, no ex-gratia payments were made relating to staff termination, medical related bills or service incurred losses suffered by staff. 180 Financial Regulation 12.4 provides that "The Secretary-General may, after full investigation, authorize the writing off of losses of cash, stores and other assets, provided that a statement of all such amounts written off shall be submitted to the External Auditor with the financial statements." During 2014, cash losses, irrecoverable receivables and advances to staff and suppliers resulted in write-offs to the total amount of £5,753 (2013: £592) for IMO and for the consolidated group £22,568 (2013: £9,549). In addition, write-offs as a result of the loss or obsolescence of inventory totalled £17,987 (2013: £91,176) for IMO and £19,146 for the consolidated group (2013: £91,809). 181 There were no cases of fraud or presumptive fraud in 2014.

NOTE 9: RELATED PARTIES AND KEY MANAGEMENT PERSONNEL Note 9.1: Key Management Personnel

IMO GBP

Number of individuals (Full Time

Equivalent)

Compensation and post adjustment

Entitlements Pension

and health plans

Total remuneration

2014

Outstanding Advances

against entitlements 31.12.2014

Outstanding Loans

31.12.2014

7.339 1,025,177 67,089 196,855 1,289,121 Nil Nil

Consolidated GBP

Number of individuals

Compensation and post adjustment

Entitlements Pension

and health plans

Total remuneration

2014

Outstanding Advances

against entitlements 31.12.2014

Outstanding Loans

31.12.2014

9.33 1,354,823 67,089 263,023 1,684,935 Nil Nil

182 Key management personnel of IMO are the Secretary-General, the six Divisional Directors and, from its establishment on 1 September 2014, the Director of the Department for Member State Audit and Implementation Support. Key management personnel of the consolidated group are the key management personnel of IMO in addition to the President of the WMU and the Director of the IMLI, as they have the authority and responsibility for planning, directing and controlling the activities of the consolidated group. 183 The aggregate remuneration paid to key management personnel includes: net salaries, post adjustment, entitlements (such as representation allowance and other

9 The number of full time equivalent key management personnel includes one Acting Divisional Director working that

capacity from 1 January 2014 until the appointment of the Director on 24 May 2014, and the Director of the Department for Member State Audit and Implementation Support from its establishment on 1 September 2014.

allowances), assignment and other grants, rental subsidy, personal effects shipment costs, and employer pension and current health insurance contributions. 184 Key management personnel are also qualified for post-employment benefits (Note 2.10) at the same level as other employees. Key management personnel of IMO are participants of UNJSPF. Note 9.2: Related Parties

185 The Organization's only related parties within the meaning of IPSAS 20 – "Related Party Disclosures" are WMU and IMLI. The consolidated group, including those bodies, has no related parties. 186 During 2014, IMO provided £450,289 (2013:£493,486) and £165,262 (2013: £203,549) in fellowship and other funding to WMU and IMLI, respectively, under its Technical Cooperation Programme. These amounts are reflected in expenditure in the IMO figures and have been eliminated on consolidation. Current liabilities of WMU towards IMO totalling £176,366 (2013:£185,144) and IMLI towards IMO of £107,284 (2013:£133,440), in respect of deferred fellowship revenue, have also been eliminated. NOTE 10: OTHER CHANGES IN NET ASSETS

187 Exchange rate differences arise due to the effect of converting the opening net assets of WMU and IMLI, whose functional currency is the Euro, at the 2014 closing rate which differs from the 2013 closing rate, and such changes are presented as a separate component of net assets/equity in accordance with IPSAS 4.

GBP

WMU IMLI Total

Opening balance at 31.12.2014 exchange rate 3,758,693 1,909,811 5,668,504

Opening balance at 01.01.2014 exchange rate 3,533,024 2,029,024 5,562,049

225,669 (119,213) 106,455

NOTE 11: CHANGE IN APPLICATION OF ACCOUNTING POLICY

188 During 2014, the Organization changed its application of accounting policy with respect to the recognition of revenue from the assessment fees charged for the work of the GESAMP Ballast Water Working Group, Goal Based Standards assessments and certain Member State Audit activities. As in each case the assessment is initiated by a submission for which a fee will be charged, and the submitter receives something of approximately equal value – the outcome of the assessment – in exchange, the Organization considers it more appropriate to recognise these fees in line with IPSAS 9, 'Revenue from Exchange Transactions', rather than previously as donor contributions under IPSAS 23 "Revenue from Non-exchange Transactions". 189 This change in approach has been applied from 1 January 2014, and in order to present consistent information in the financial statements, the 2013 comparative figure has also been restated. The amount of revenue from assessment fees in 2014 is £837,150, as shown in Note 3.3. The effect of restating the comparative figure for 2013 is shown below:

Statement of Financial Performance Reported in

2013 financial statements

Adjustment Restated comparative

figure

Revenue GBP

Donor contributions 4,652,982 (339,865) 4,313,117

Commercial activities 11,851,452 339,865 12,191,317

NOTE 12: EVENTS AFTER REPORTING DATE

190 IMO's reporting date is 31 December 2014. On the date of signing of these accounts, there had been no material events, favourable or unfavourable, incurred between the balance sheet date and the date when the financial statements were authorized for issue that would have impacted these statements.

ANNEX 1 (unaudited)

Name Address

IMO International Maritime Organization

4, Albert Embankment London SE1 7SR United Kingdom

General Counsel Director, Legal Affairs and External Relations Division

Mr. F. J. Kenney 4, Albert Embankment London SE1 7SR United Kingdom

Actuary Barnett Waddingham LLP

Cheapside House 138 Cheapside London EC2V 6BW

Principal Bankers J.P. Morgan Chase JP Morgan Chase Bank N.A. 25 Bank Street Canary Wharf London E14 5JP

External Auditor Auditor General of Ghana

The Auditor General Ministry Block O P.O. Box M 96 Accra Ghana

***

ANNEX 2

OPINION OF THE EXTERNAL AUDITOR ON THE ORGANIZATION'S FINANCIAL

STATEMENTS FOR THE FINANCIAL PERIOD ENDED 31 DECEMBER 2014

___________

international maritime organization secretary-general… financial statements for the...

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